If You Vilify Them, They Will Leave…

The New York Times puts a curious spin on the current trend of mega bankers leaving the confines of their Wall Street palaces (by force or otherwise) for the greener pastures of smaller investment houses. The reasons, the Times asserts, vary: joining banks that do not face tightening regulations, including foreign banks; opting to go with start-up companies with the potential for a future payout; or, leaving simply because of culture clashes at merging companies.

One other possible explanation - how about that these guys simply looked across the street at the AIG building and the witch hunts their financial counterparts were subjected to over compensation and said, “Not me”.

But some feel this exodus is a good thing; that this marks the beginning of a “broad and necessary” reshaping of Wall Street. “If risk-taking spreads out to these smaller institutions, it is no longer a systematic threat,” says Matthew Richardson, professor of economics at New York University.

Huh? But I thought that the current financial conflagration occurred because the toxic assets of the big guys were whacked up, bundled and repackaged to the smaller guys. It became a systematic threat when the smaller institutions assumed this risk. I'm not sure how hiring on some of the braintrust that made some bad decisions on Wall Street will reduce this risk on Main Street.