The pay bonus for working at a "Too Big to Fail" bank is only getting bigger.
Outsized paychecks are often cited as one of the reasons for the financial crisis. So what are the executives at the biggest banks doing? They are upping their pay. In fact, pay at the big banks is not rising just for CEOs and investment bankers but for everyone.
According to a new study by bank research website, BankRegData.com, the gap between what the largest banks pay and their smaller rivals has risen dramatically since the financial crisis. Last year, the average compensation expense (salary plus benefits) at banks with at least $1 trillion in loans for all employee was 96,355. That compares to pay of $60,755 at banks with less than $100 million in loans.
Of course, large banks have always paid more than smaller banks. But, recently, big banks have been upping their pay much faster than their smaller rivals. Last year, pay at the largest banks rose 6.7%, far more than the 3.7% hike in pay that employees at other banks received. And that was on top of 9% pay raise in 2009 for the big banks. The result: Last year, the salaries at the big banks were 59% higher than those being paid by their much smaller rivals. That's up from a pay gap of just 43% in 2008.
Among the big banks, the best paying firm is JPMorgan Chase, which handed out an average compensation of $114,000 to its employees in 2010. Wells Fargo's employees received $99,000. While the average employee at Bank of America took home $95,000 in pay and benefits. Citigroup, which was the bank closest to failing in the financial crisis, is the only firm among the big banks to pay less than many of its smaller rivals. Compensation at Citi averaged just $76,000.
Bill Moreland, who runs BankRegData, says it is not immediately clear why the big banks would pay so much more on average than the smaller ones. While big banks do have investment banking arms and other executive positions that command high salaries, they also have larger call center, collections department and branch staff, which Moreland figures should balance out the pay. But it doesn't. What's more, Moreland contends, the performance of the big banks doesn't seem to warrant outsized pay either. He says the large banks have on average done a worse job of managing their delinquent loans than smaller banks. Net interest margins, a key measure of profitability at a bank, are about the same at the large banks as they are at the small ones.
So what accounts for the bigger pay checks? Moreland is stumped. But here's one guess: The bank bailouts. Being "Too Big To Fail" seems to have lowered the borrowing costs of the largest banks in the nation. A government backstop makes the big banks less risky. It may also allow them to pay more. If the government is coming to the rescue, then the banks can put less of their money in reserve for a rainy day and pay more of it out today in compensation. Of course, new regulations and regulatory scrutiny upping the amount of capital big banks have to hold was supposed to be another check on risk taking and pay. But at least on the pay side, those new regulations don't seem to be working.
How much does the average Bank Teller make per year would it be close to say the $95K average at Bank of America?
What Central Control Do You Favor?
Being too big to fail highlights the third leg of a three legged stool that supports a thriving society and government. That leg is Free Markets and in our country they are becoming less and less free. Without free markets goods and services cost more, there is less innovation, resources are allocated inappropriately, income disparity rises and society deteriorates over all.
Conservatives in this country lambaste a central government, like China, having too much control over its industry and economic markets. They sight history while saying when power gets too centralized, it is too far removed from the marketplace and the citizens its serves to make decisions in the best interest of the society as a whole. Their personal self interest overrides the country that they are suppose to serve.
In our country, we have centralized control over markets and industries; however, it is in the hands of a few large companies in a significant number of markets. Banking is one of those industries. In a recent trip to Minneapolis I heard a report on the radio that 80% of the savings deposits held by financial institutions were controlled by two banks; U.S. Bank and Wells Fargo. 80% is control of a market!
In our society, if major industries, like banking, can be controlled by a single company, or a small number of companies, the stewards of those companies, their Board of Directors, are in a better position to fulfill their duties of Maximizing the wealth of its shareholders. This objective of wealth maximization can get out of sync with the objective of providing the best products and services to the public at the lowest possible price. http://goo.gl/TpPFv
Gamesmith94134: 'Too Big to Fail' Pays Off: Big Bank Salaries Rising Faster than Rivals
"This objective of wealth maximization can get out of sync with the objective of providing the best products and services to the public at the lowest possible price.", Became the facts of life that some banking or industries are too big to fall, since we, our government centralized control made it easy and less effective by eliminating competitions in the same industry and all industries; and they ran by a few including our retired officials on the board of Directors. So, would you say conflict of interests? Since Sherman Act is often used in our Congress that many mergers made feasible in sync of the board of Directors and government officials. Many rules applying to improvising the industries are consigned to the Board of Directors or the political parties that control the industry. So, every complaint of conflict of interest is not so precise or in the grey area that will be fixed by its parties in the committees of our Congress. For instance, many corporations can tax free and they only pays the committee in its researches or expenses approval of the Board or Committee. They are in sync to compromise on the wealth maximization in less of the best product and services to the public at the lowest possible price. I often ponder on the contributions that went to the elections or under the table, and I think their over-head were too much bear. It is why everything or rulings are being compromised regardless how many times they would push to reform; it is all done well after the election or the changing of member in the Board. It was all co-incident; it is only you can believe. Can't you?
I even believe that your savings at the bank went to US Bank and Wells Fargo; it is how the funds are made available to be consolidated and your lesser part of the saving only remains in your banks. Thus, your bank does not finance your business or your home either in the less of the consolidators of the funds. So, don't depend on it. So, if you ask how your bank defaulted, your bank cannot give you an answer because your banker lost track of his money after being consolidated. I am not blaming the banking industry in the recent fallouts; but I am certain that the banking Committee and the Board lost their ways too after the consolidation like our real estate fallout disaster. It is just complicated to know who has the title of the default properties till they fall out of their pockets. If you complain of the "too big to fall" payoffs, they think they deserve them as long as your money or property is still in their pockets; and the banks have no control of it. This is how it was consolidated or central control as some described. Believe or not, it is all legal and done.
If you are looking into the resolution of the S&L or the "To big to fall", the reform must come from S&L itself. Decentralized it and diversified it till it is understandable who is responsible of it; and what crime they committed. Not Committee.
It makes me giggle, committed not commitee?
May the Buddha bless you?
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