Do these people know what they\’re doing?

On these limits on financial market pay.

On average, under Mr Feinberg\’s plan, the total compensation of the 175 executives affected will fall by 50pc. But basic cash salaries will see the biggest reductions, being cut by as much as 90pc in extreme cases.

At AIG Financial Products, the London-based division which traded in the complex derivative products responsible for the insurer\’s near-collapse last September, no employee is expected to receive more than $200,000 in total compensation, with no shares or share options being granted in this case.

That\’s insane. £125,000 or so? They\’re seriously thinking that they\’re going to get the people with the skills to clean up hundreds of billions of CDS mess for that sort of money? That\’s junior level international accountant sort of money.

Wouldn\’t we actually prefer to pay for the talent needed?

7 thoughts on “Do these people know what they\’re doing?”

  1. well … Tim I think it’s best to regard this as an untested empirical question. The actual difference in skill and competence between somebody who would accept a job for £100,000 and somebody who has a, say, £300,000 minimum, is unknown. I have encountered some worryingly incompetent very highly paid people in my time.

    I agree in general it’s stupid to think that pay levels aren’t set for a reason (the need to recruit a certain type of worker) and to imagine you can just wade in, set lower wages and expect things to work out OK … but at the same time, it’s possible that high wages become a sort of self-sustaining habit … we don’t actually know how large the decline in performance would be in many jobs, if you only hired people willing to work on £100,000. You might struggle to get very experienced high powered managers, but you’d get plenty of smart youngsters, no?

  2. Nope. Junior accountants earn £30-40k a year. £125k a year is head-of-finance level for non-financial institutions.

  3. Are we talking about the salaries for new people hired to clean up the mess? Or the salaries still being paid to the people that made the mess in the first place?

  4. Ed: it doesn’t matter. Both recruitment and retention are going to be nuked at this level of pay. The Obama administration is rapidly proving itself to be the most incompetent and unpleasant since the Carter years. Its doctrinaire refusal to accept reality is positively Murphyesque.

  5. Do you think you might be a tad out of touch at all? £125K aint chicken feed, it’s top 1% pay.

    Tim adds: Wages are relveant in comparison: for City pay that’s junior management level. It simply ain’t seasoned pro in charge of hundreds of billions of money.

    There was one bloke working at AIG. For $1 a year. Plus a $1 million bonus after 12 months. That was one of the blokes they tried to screw over with the 90% retrospective bonus tax of course.

    People will, as above, pull together in times of trouble. But £125,000 in The City just doesn’t buy you what AIG FP arguably needs.

  6. @1 @3 that pay is director level at a Big 4 accounting firm – ie minimum 10 years qualified, so about 35 years old if you joined out of uni. Not “junior”, but not all that senior by the standards of those firms.

    However, for this particular job (ie successfully winding up the AIG mess), it’s not unreasonable to assume the extra CV points and hence future pay from doing it well will outweigh the salary loss compared to spending a couple of years working for $Anonymous_Bank…

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