Clipping Wall Street Compensation Doesn't Help Us Much

With public sentiment rising against the egregiousness of Wall Street bonuses, the Treasury and the Federal Reserve have separately proffered plans seeking to curb executive pay in the financial sector. Both plans seek to reduce current compensation incentives that richly reward short-term profits and the selling of high risk financial instruments, the type of incentives that fueled the behavior that led to the crash in the first place. The Treasury plan is specific to the top seven recipients of taxpayer bailouts which includes Citigroup, AIG and Bank of America. They seek to reduce the pay of the top 25 executives by 50% over last year while the Federal Reserve seeks sweeping overhauls in compensation across the entire financial sector.

While this is all nice and good, these people are already rich and they will find work-arounds to keep themselves that way. Meanwhile the Dow continues to flip-flop across the 10,000 point threshold rising 132 points today after losing just as much in the previous two. This was too much of an increase for flimsy profit data especially when initial job claims rose "unexpectedly" to 531,000. It is clear that profits continue to be engineered through cost cutting and not earnings. While layoff news is no longer grabbing headlines, a quick visit to the Bureau of Labor Statistics shows mass layoffs are still high. In September 248,000 persons were laid off. That is one quarter of a million people laid off last month. And still the prospects are grim, a visit to the aptly named www.dailyjobcuts.com will have you crying.

While attempts to clip compensation on Wall Street may soothe us in the short term, it doesn't do much to help us really. What companies are doing to the rest of us in order to gain those earnings that makes Wall Street happy is far worse.