Back Already, Wall Street? That Was Quick. 9APR10 from MOJO

Guess what? Wall Street is back on top!

Over the past year public attention has mostly focused on CEO pay in the financial sector, but a few days ago the Wall Street Journal reported that this was, in essence, just a feint. The top guys may have taken very public pay cuts, but they can afford to take one for the team now and again. Underneath all the PR, though, it was a banner year:

Leading firms paid out $140 billion in compensation and benefits, the highest number in history, based on a final tally of the pay disclosures at 38 financial-services firms. That figure […] represented an increase from $123 billion earned by financial professionals in 2008 and $137 billion in 2007.

You might well wonder, what with the rest of the country mired in a historic recession, why Wall Street is doing so well. The answer is pretty simple: The government bailed them out and they're now back to their usual tricks: making huge profits based on highly leveraged investments. Except now it's even easier. Interest rates are so low that even an incompetent banker could hardly help but make money these days.

In one sense, this was inevitable. We didn't have much choice but to rescue the banking sector, after all. Like water or gas or electricity, it's just too vital to the rest of the economy to allow it to fail. And if you want to make banks more solvent, that means letting them earn a lot of money.

But make no mistake: That money is the result of deliberate government policy, and without it Wall Street would still be on its knees gasping for breath. It's one thing to decide that this is in no one's best interest and we need to nurse them back to health via robust earnings. It's quite another to see those earnings used not to build up bigger capital cushions, but to provide huge paydays for the industry that caused the recession in the first place.