4 ms·

It’s actually hilarious that the three most troubled banks had the highest employee compensation (though that data is 4 years old). The headline writes itself

pembrook 4y ago
This suggests that banking is extremely efficient, basically a textbook example of the efficient markets hypothesis. The only way you can create outsized returns to pay outsized compensation in that business is by taking outsized risk. Hence the top 3 highest paying banks are also the ones who failed. This also suggests average compensation is a fantastic short-signal the next time the economy starts re-leveraging.
- IG_Semmelweiss 4y ago
  I'd say it suggests that the banks that were most succesful in growing and attracting depositors were the ones with the best customer service overall. Problem is, those are also the most finicky, nitpicking customers in the market, and they will bail faster than you can do an equity raise... Does anyone believe another bank would have collapsed as quickly, even with the same MBS portfolio and impaired loans..if it was composed by a random assortment of customers vs highly networked small opcos + their investors ?
- Quarrelsome 4y ago
  I still don't understand how banking always pays so well considering how the industry appears to be so good at creating internal level crises every couple of decades. There are forever headlines in the UK about the banking industry putting pressure on the government to be able to pay out larger bonuses and such. Bank executives opining that they can't get the "best employees" if they don't pay the best. As you suggest it sounds to me like the "best" are the worst/most corrupt biggest risk takers. Imagine if software had a Y2K every couple of decades that cost the public purse billion while everyone was pushing to pay developers even more. Maybe I don't understand banking but it just seems weird.
  - watwut 4y ago
    Maybe these are not in opposition. Maybe banking need to pay more, because ethical people leave, people who have feeling of guilt want more money to compensate feeling of guilt and the remaining unethical people are good at negotiating for money. The regular crisis and having a lot of fraud inside is making it expensive.
  - jen20 4y ago
    > Imagine if software had a Y2K every couple of decades that cost the public purse billion while everyone was pushing to pay developers even more. Heartbleed, Meltdown, Spectre, log4j etc all cost the taxpayer more than this event.
    - Quarrelsome 4y ago
      but more than 2008? My nation has gone through 15 years of deep public spending cuts as a "consequence" of 2008 and the resulting deficit (albeit it was likely just used an excuse to implement anti-public-spending political ideology). Also I don't remember any of those events dipping into the public purse but rather being commercial liabilities.
jjeaff 4y ago
Probably has more to do with the fact that those 3 banks are in 3 very high cost of living areas. New York, Bay Area, Socal

pembrook 4y ago

This suggests that banking is extremely efficient, basically a textbook example of the efficient markets hypothesis. The only way you can create outsized returns to pay outsized compensation in that business is by taking outsized risk. Hence the top 3 highest paying banks are also the ones who failed. This also suggests average compensation is a fantastic short-signal the next time the economy starts re-leveraging.

IG_Semmelweiss 4y ago
I'd say it suggests that the banks that were most succesful in growing and attracting depositors were the ones with the best customer service overall. Problem is, those are also the most finicky, nitpicking customers in the market, and they will bail faster than you can do an equity raise... Does anyone believe another bank would have collapsed as quickly, even with the same MBS portfolio and impaired loans..if it was composed by a random assortment of customers vs highly networked small opcos + their investors ?
Quarrelsome 4y ago
I still don't understand how banking always pays so well considering how the industry appears to be so good at creating internal level crises every couple of decades. There are forever headlines in the UK about the banking industry putting pressure on the government to be able to pay out larger bonuses and such. Bank executives opining that they can't get the "best employees" if they don't pay the best. As you suggest it sounds to me like the "best" are the worst/most corrupt biggest risk takers. Imagine if software had a Y2K every couple of decades that cost the public purse billion while everyone was pushing to pay developers even more. Maybe I don't understand banking but it just seems weird.
- watwut 4y ago
  Maybe these are not in opposition. Maybe banking need to pay more, because ethical people leave, people who have feeling of guilt want more money to compensate feeling of guilt and the remaining unethical people are good at negotiating for money. The regular crisis and having a lot of fraud inside is making it expensive.
- jen20 4y ago
  > Imagine if software had a Y2K every couple of decades that cost the public purse billion while everyone was pushing to pay developers even more. Heartbleed, Meltdown, Spectre, log4j etc all cost the taxpayer more than this event.
  - Quarrelsome 4y ago
    but more than 2008? My nation has gone through 15 years of deep public spending cuts as a "consequence" of 2008 and the resulting deficit (albeit it was likely just used an excuse to implement anti-public-spending political ideology). Also I don't remember any of those events dipping into the public purse but rather being commercial liabilities.

jjeaff 4y ago

Probably has more to do with the fact that those 3 banks are in 3 very high cost of living areas. New York, Bay Area, Socal