Why Wall Street Gets Paid So Damn Much

And why it's probably bad for society
By Kevin Spak,  Newser Staff
Posted Jan 18, 2010 9:21 AM CST
In this Dec. 31, 2009 file photo, snow falls outside the New York Stock Exchange in New York.   (AP Photo/Henny Ray Abrams, file)

(Newser) – Wall Street bankers may be a greedy lot, but their eye-popping bonuses are the result of math, not avarice. “Most of us are paid based on what we produce,” explains Robert Samuelson in the Washington Post. “By contrast, Wall Street compensation levels are tied to the nation’s overall wealth.” National income tends always to be a lower figure than national wealth—in 2007, GDP was $14 trillion, while household wealth was $77 trillion, 5.5 times higher.

“People who are trying to protect or expand existing wealth are playing for much higher money stakes than even hardworking or highly skilled producers,” and that’s why they’re paid more. The big question: Is it wise for society to focus so much on existing wealth, rather than creating wealth? Are Wall Street’s big bonuses too darn enticing? “It’s bad for the rest of the economy,” opines one economist. “We also need smart brains outside of finance.”

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