What if Wall Street pay was 'normal'?

Morgan Stanley CEO James Gorman has been put on the hot seat by the company's institutional investors over its compensation policies, according to a report in the Wall Street Journal. “How dare you give so much of the pie to traders and bankers when we should be getting the spoils,” the investors essentially said. If Morgan Stanley's shareholders and the owners of the other Wall Streets' giants get their way about pay, let's imagine the landscape that would emerge. First, New York State and New York City would probably take the gas pipe — if Con Edison doesn't turn it off first. Like addicts jonesing for heroin, both behemoth bureaucracies depend on Wall Street and its high salaries and bonuses for their tax fix. Since the state is basically a de-industrialized mini-Michigan north of the Big Apple's northern suburbs, and since practically every other kind of business (publishing, fashion, printing, electronics) that once marked New York City's vibrant local economy has fled because of taxes, Wall Street is the only game in town. No big Wall Street incomes, no big tax revenue. Second, we'd probably see a population exodus. If highly paid derivatives traders wind up making what mid-level insurance executives now earn, why and how will they put up with the City's high costs, crowding and endless struggle to lead an upper-middle-class life? Rather than the millions it now requires to lead a comfortable life in Manhattan, better to move to Columbus or Des Moines or somewhere normal and live like the rest of the nation's haut bourgeois. Would today's high-flyers miss the Metropolitan Opera, the museums and restaurants open past midnight? Yeah, but not that much. Third, finance would become boring. Since few people understand what Wall Street does — other than that it pays really well — the financial business retains a mystique that is way out of synch with reality. Sure, traders and investment bankers are crooks, according to prevailing public opinion, but they're brilliant and do fascinating work, or at least so goes the assumption. Well, those of us who understand what goes on in front of the blinking screens know that most of it ain't rocket science. And the daily routine of most Wall Street buying and selling and associated recordkeeping is kind of dull. Start paying a muni arbitrager like a manufacturer's representative and he'll turn into the schmoe pretty girls now secretly think he is — but dare not admit. Finally, bringing Wall Street's pay more in line with Main Street's would have a shocking and unexpected effect on the economy: not much would happen. Companies would still raise capital, securities would trade and America would go on. Would we fall behind Latvia in financial innovation? Probably not. Would London take over? Maybe, but who'd want a snooty Brit investment banker when you could talk to a friendlier, cheaper American? But fear not. Wal-Mart is not coming to Wall Street anytime soon. If there's one thing Wall Streeters know how to engineer, it's their compensation.