If banks paid less, they would have to pay their shareholders more instead, which they always seem reluctant to do. Banks dont horde cash like industrial companies, or pay vastly more to the executives than the workers, so in many ways theu are model companies. The problem is the level of profits they make, and the amount to which they are subsidised by the government (especially recently).
There are only two real problems with the banking system in our country: 1) it's too systemically integrated, and 2) it's not on the hook for its own risk.
Both of these are antitrust issues at their core. Banks need to be broken up, so that they are no longer "too big to fail." From there, we don't need to bail them out, so they can actually fail, which means they will stop taking such outrageous risks and over-leveraging themselves.
I honestly don't care if some 28 year old trader is making more money in a year than I'll see in 20. But I do care that I backstop his risk with my tax dollars, and he suffers no personal loss whatsoever if the risk materializes.
Tell that to the Bear Stearns equity holders, who were 99% wiped out, or the Lehman Bros. equity holders who were completely wiped out.
>"Banks need to be broken up, so that they are no longer "too big to fail.""
Fine, if you want to cripple long term economic growth by requiring banks to hold far more liquid assets. Or, they can rely on the Fed as the lender of last resort to step in when they need liquidity (which the Fed has done). I prefer the latter.
I actually agree with this. The problem with banks isn't the level of compensation, it's the lack of regulation and excessive risk taking. But the compensation model is great. At Goldman, etc, 50% of revenues go to compensation. The people getting paid are the ones who do the labor, not a bunch of passive shareholders.
>"and the amount to which they are subsidised by the government (especially recently)."
False. TARP has been paid back, at a small profit, to the FED, which returns the money to Treasury. The auto companies are a black hole of subsidies, but that's another story.
