Exodus from Wall Street?

The lead story in The New York Times on Sunday was titled, “Crisis Reshaping Wall Street As Stars Begin to Scatter.” It describes a phenomenon of top people leaving financial careers on Wall Street because of government restrictions.

It notes a “brain drain” on Wall Street as top executives, unhappy with government restrictions regading bonuses and other matters, leave large organizations such as Citibank, for smaller yet promising investment firms. Their departure seems to verify CEO claims about the need for “retention” payments, their new terminology for bonuses.

I’m not so sure this is all a bad thing.  An invigorated financial sector with new competition may be just what our nation needs. Competition leads to innovation and is the basis of our capitalistic system. How ironic that the financial sector is one of the last to discover this.

The main question is whether the loss of personnel will prove fatal to big banks. I fail to see how this can occur. Surely these banks have tremendous resources at their disposal, and their dominance of the marketplace still carries major competitive benefits.

The new competition could also destroy the “too big to fail” conundrum we’ve been faced with during the current crisis. With up and coming investment firms and banks to potentially step into a breach, these larger companies will have to pay more attention to providing improved services for their customers, a process that will benefit everyone.