The government needs to unload their stake now, while there are still a bunch of wildly bullish people. You’re right though… it would be irrational for Citi to go back to the go go days so quickly. However, I think they are back already from what I hear!

I read the very humorous open letter and it is certainly a salient question on the gov’t's mind. It isn’t right on moral grounds but if the gov’t allows Citi (and everyone else) to do it, what can one do? But I personally don’t think the gov’t will allow it. I am surmizing that the Administration does not want another bomb on its hands, so it is going to set the appropriate time at which Citicorp could repay the gov’t. The gov’t has the right to refuse the payment on the grounds that Citi is still vulnerable to another attack, and every day that the Dow drops 200 points will strengthen the gov’t resolve. And I can guarantee you that the gov’t will come out with the regulations before bonus is set, there are enough angry folks working for the gov’t to ensure that.

Fantastic questions! They really address the core of capitalism, so here are my humble opinions:

I am a proponent of capitalism and the free market so therefore I do not believe in massive regulations of any sort, on Wall Street or Main Street, EXCEPT in extenuating circumstances where there are unfair plays involved, or in a crisis where it requires gov’t bailout, so as to prevent future crisis. If someone takes the bailout money from the gov’t, which happens to be taxpayers’ money (your money and my money), yes, they should be regulated UNTIL such a time when all the bailout monies are returned (and some), then they can do whatever they like with their earnings. If a firm did not take taxpayers’ money, they should not be regulated. At issue is that the general public feels cheated because the gov’t used their tax money to bailout the very same firms that in turn halved their 401Ks!

I am not here to judge what is too much for someone to earn in any industry, it is supply and demand, and luck (if one is lucky enough to enter a certain high-paying industry), so if someone is willing to write me a $100 Mil check, I will take it (wouldn’t anyone???)!

A BIG “regulated” firm will be able to compete just as well as any unregulated ones since they have enough capital, infrastructure and resources to begin with and will continue to gain revenue, the only difference of course is in pay and one can argue that the best people will go to the unregulated ones. Reality is that every regulation has loopholes and firms will get around the comp issue and make it a pretty even playing field for all. I have seen people get huge guarantees at the top of bull markets only to be told it be be stretched out over 5 years instead of one year when the market collapsed; and I have seen people come in with below market rates and once they prove their worth and have other offers from competitors, the bosses will even double those offers, it is all about timing in this business.

Thanks for your thought provaoking questions.

If not, how do you think firms who are regulated can compete with the unregulated firms? And finally, if a firm does receive tax payer bailout money, but pays it back, should they still be regulated?

Thanks for sharing your thoughts!

Many thanks for your comments and support. My personal view is that without gov’t intervention it will get back to and surpass previous highs as long as 1) there is a raging bull market, and 2) there are willing payers who will write blank checks in the names of attracting talents. I have seen record comps broken at every new bull market cycle, and it will perpetuate itself. BUT with populous anger abound and gov’t intervention (which I assume will happen formulaically with some sort of link between risk and rewards/losses), it will put a temporary cap on comp and will lengthen the pay out period. Wall Street comp is feast or famine (or more like smaller feast relative to other industry), if one stays in a cycle long enough, one will see huge cyclical moves in comp, but everyone still make a decent living.

Thanks.

I’m curious to know whether you think in general, pay will get back to the go-go days on Wall St. (was that just 2 years ago in 2007?), or whether you think pay will be structurally lower for a long time?

Thanks