The New York Times this morning runs a front page story this morning on something we’ve been covering every day here at Clusterstock: the brain drain is occurring at some of Wall Street’s biggest firms. They are some of the same banks blamed for setting off the worst downturn since the Depression.
Top bankers have been leaving Goldman Sachs, Morgan Stanley, Citigroup and others in rising numbers to join banks that do not face tighter regulation, including foreign banks, or start-up companies eager to build themselves into tomorrow’s financial powerhouses. Others are leaving because of culture clashes at merging companies, like Bank of America and Merrill Lynch, and still others are simply retiring early.
Of course, the banks losing top talent scream bloody murder about this and will do everything in their power to get away from regulations that attempt to stop them from enriching employees with TARP money. Their most powerful argument is a kind of misplaced free market position against government interference with their operations. Looked at closely, however, there’s nothing to do this escept special pleading: a demand for an active, engaged government for socializing and a demand for a limited government for privatizing profits.
In fact, financial experts believe that the exit of talent is actually reducing moral hazard and increasing market discipline. It is, in short, undoing some of the damage to markets that they bailouts have caused. What’s more, the attendant reshaping may leave the banking industry less concentrated and with less systemic risk.