Good bankers have an incentive to go to the places that offer them the most.\u00a0 That’s simple.<\/p>\n
Banks, like all companies have a powerful incentive to keep their best producers<\/a>.\u00a0 Right now, American banks with little prospect of soon repaying TARP are losing talent to hedge funds, foreign banks, and other non-government owned entities in droves<\/a>.<\/p>\n The government has the incentive to avoid embarrassment about how much bankers get paid in times when banks are in trouble.\u00a0 Officials have necessarily focused on large institutions, especially TBTF firms, and have crafted all sorts of brain-damaged rules<\/a> to try to contain the pay of bankers at those firms.\u00a0 However,\u00a0 those rules don’t distinguish good bankers from poor ones within these large institutions.\u00a0 That’s because compensation regulation is driven by headlines, while compensation is more complicated than headlines can capture.\u00a0 Which gets us to another incentive.<\/p>\n The media has an incentive to provide blaring headlines, which is how they sell stories.\u00a0 One way to do that is to tap into the deep vein of envy that exists among the masses.\u00a0 Most readers love to hate the “rich,” especially if they feel they can blame the rich for themselves being worse off.<\/p>\n This brings us full circle in the ecology of incentives.\u00a0 Headline-driven media does not allow fine distinctions between good and bad bankers.\u00a0 The compensation constraints intended to punish whole firms or industries invariably punish those that deserved their pay.\u00a0 These deserving ones feel the same outrage at being punished for their success that the envious masses feel about the underserving ones getting paid anything at all.\u00a0 In a bad environment, the best ones leave first.<\/p>\n Alas, there is a tension between economic news, which is sold with headlines, and economics, which is inherently nuanced.\u00a0 That is why readers and presidents prefer one-handed economists<\/a>.\u00a0 Which is why only hacks<\/a> do well in the media and in any administration.\u00a0 The good ones<\/a> do their best under the constraints of politics, pick up some real world experience, and go back to the cocoon of their ivory towers.<\/p>\n The rest of us are left anxious<\/a> and confused<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":" Good bankers have an incentive to go to the places that offer them the most.\u00a0 That’s simple. Banks, like all companies have a powerful incentive to keep their best producers.\u00a0 Right now, American banks with little prospect of soon repaying TARP are losing talent to hedge funds, foreign banks, and other non-government owned entities in […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7,25],"tags":[],"class_list":["post-1205","post","type-post","status-publish","format-standard","hentry","category-economics","category-reporting-on-pay"],"_links":{"self":[{"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/posts\/1205","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/comments?post=1205"}],"version-history":[{"count":8,"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/posts\/1205\/revisions"}],"predecessor-version":[{"id":1213,"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/posts\/1205\/revisions\/1213"}],"wp:attachment":[{"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/media?parent=1205"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/categories?post=1205"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/tags?post=1205"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}