Why Wall Street bonuses are necessary

Businessman with $100 bills in suit jacket pocket.

Robert Teitelman

TEXT OF INTERVIEW

Kai Ryssdal: Wall Street's bonus situation is somewhere between an embarrassment of riches and a looming public relations disaster. Over the next week or so we are going to learn exactly how big some of those bonuses are going be. As well as all kinds of explanations about why they are really and truly necessary. We thought we'd spend some time today exploring that side of the argument. Bob Teitelman is the editor in chief of The Deal, that's a magazine and a Web site about Wall Street. Bob, it's good to have you with us.

Bob Teitelman: Great to be here.

Ryssdal: The president's spokesman, Robert Gibbs, came out and said once again today, that it's the White House's belief that the banks just don't get it about the bonuses. That there's this fundamental disconnect between what happens on Wall Street and the entire rest of the economy. Do you buy that?

Teitelman: I buy that in that there is a disconnect there. What I don't buy is that the issue has been so oversimplified over time and reduced to a sort of cartoon opposition of Wall Street and Main Street. That's what I don't buy. There is a disconnect because obviously the rest of the country doesn't think Wall Street should get bonuses and folks on Wall Street believe that they should, so there is a disconnect.

Ryssdal: Well, I don't know if I can say this on this program, but go ahead and complicate it for us. What part is the rest of the country missing?

Teitelman: There's a lot of places for these folks to go if they don't get the money they claim they deserve at the big banks. And you can take that any way you want in terms of whether they deserve it or not. But there's a lot of places for them to go. There's thousands of hedge funds, there's hundreds of private equity firms out there that are not at this point under any kind of regulatory oversight from the government.

Ryssdal: Let me ask you this, though, and it can roughly be condensed down into the so what question. It's bad for Lloyd Blankfein and Goldman Sachs if his bankers go somewhere else, but what difference does that really make for the rest of us?

Teitelman: Two of the big issues involving the bonus argument is one, the too big to fail problem, which is that there are some banks that are too big to fail. And two, that finance is too large for the economy, that we have an over-mighty finance establishment. This does not solve either one of those problems. You just shift the talent, you shift it away from regulation in a sense.

Ryssdal: You'll grant that the amounts involved are troubling.

Teitelman: Yes. Yes. They're troubling. Historically, they're troubling. Yes. But that's not the issue that I'm really dealing with here.

Ryssdal: What about the objection from taxpayers that say, listen, there wouldn't be a Wall Street if we hadn't ponied up $700 billion 18 months ago.

Teitelman: You know, if you're going to regulate something like bonuses, you're going to have to regulate them everywhere. You're not going to be able to let anybody get away. It's a little like the health care industry, where you get a partial form of regulation. And whenever you get a partial form of regulation, you get a sort of call shift that goes somewhere else. It goes to the place where it's not regulated. Then the question becomes do you really want to regulate pay across the board, in a million different places, because it's a much more difficult issue. And I'm not sure that people have considered that yet.

Ryssdal: When you talk to the folks you know on Wall Street, I mean, put me inside their heads. Do they get the public-perception disconnect?

Teitelman: Some of them don't. Some of them do, obviously. But I have spoken to some of them that I have been surprised at how blind they are to the unhappiness out there.

Ryssdal: Bob Teitelman, he's the editor in chief of The Deal. Bob, thanks a lot.

Teitelman: Great. Thank you.

Robert Teitelman

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