It's Your Money....

Dean Baker takes on the argument that we gotta pay them bankers to keep the talent, this time the WaPo version:

If the Post had solicited the views of a populist, or an economist, they might have told readers that much of what the banks earn comes directly at the expense of consumers and businesses. For example, suppose that Goldman Sachs' large trading profits last quarter came in part from oil trades. This would mean that it managed to buy oil or oil derivatives on the way up, preventing oil companies from getting as much profit as they otherwise would have received. This is money that they could have used in developing new energy sources, as the oil companies so often tell us. Alternatively, if the run-up was purely speculative, Goldman's successful traders caused consumers to pay more money for gas and home heating oil than otherwise would have been the case. There would be a similar story if Goldman made its money on the way down, with the trader pulling way money that would have otherwise gone to consumers or producers.

The public has no obvious interest in subsidizing traders to speculate in financial markets. If the speculators win, then the loans that Goldman and the others receive will be repaid, but this repayment will only be a portion of the higher prices paid by consumers and lower profits earned by producers as a result of Goldman's speculation.

Moving beyond the world of speculation, it is not clear that the marginal contribution of the individual bank executives involved in the more mundane tasks of running a bank can run into the millions or tens of millions of dollars a year.