A Wall Street pay puzzle(Washington Post Alert!)

Why does Wall Street make the big bucks? A nation with 10 percent unemployment is understandably puzzled and outraged when the very people at the center of the financial crisis seem to be the first to recover and are pulling down fabulous pay packages. At Goldman Sachs, the average pay for 2009 has been estimated at nearly $600,000; at J.P. Morgan Chase's investment bank, it's been reckoned at slightly below $400,000. These averages conceal multimillion-dollar bonuses for top traders and investment bankers; underlings get smaller sums. Are Wall Street's leaders that much smarter and more industrious than everyone else?

Maybe this is because the employees use the money supplied by investors to make huge profits, and take most of the money for themselves?

That’s why you should never buy stock in Wall St. brokerage or large bank. The people who work there are experts at financial manipulations that result in most of the cash flow ending up in their own accounts.

1. The Law of Large numbers.

A small percent of a Large Number can be a pretty Large Number in itself.

2. Does WaPo understand the concept of ROI - Return on Investment?

Kneale: The Real Numbers on Wall Street Pay - FR / CNBC, 2010 January 15, by Dennis Kneale

The value added by the financial industry, exclusive of real estate, is $1.15 trillion per year.

They earn every penny of it. They create wealth on a huge scale, all the time.

The US financial industry is one of the greatest wealth creation engines in the history of the world, if not the greatest. It is the envy of the world and obviously of not a few non-financiers in this country as well.

This has been true clear back to the American founding period - both the enterprise and success and value creation by US finance, and the envious hatred directed at it, by both foreigners and domestic non-financial politicos.

None of them have cost the rest of us a red cent; they in fact throw off huge positive externalities that all the rest of us enjoy, on top of earning their own pay. In fact, the only comparable institutions in history, in the sheer scale of the benefit they have conferred on third parties by their efforts, are the UK and then US militaries, and modern science.

And do you know how much graditude they get for all they have done for the rest of us, as well as themselves? Bumpkiss. How much they are admired and emulated? Bumpkiss.

Why? Because losers suck, that's why. Dirt simple.

Well, they are going to have to do it without my capital.

I will invest in oil, cigarettes, and utilities, industries where the managers know how to treat the stockholders with respect.

It would be much better if investment banks and brokerage houses became private partnerships again. They could play with their own money, and make as much as they can.

They already invest money entrusted to them entirely voluntarily and you haven't got a leg to stand on complaining about any of it. If you prefer other industries, fine, suit yourself.

Modern American finance subsidizes the rest of the country and does so on a huge scale, not the reverse. Stop spreading baseless class war slander against a great American industry.

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