Pay Wall Street Less? Hell, Yes

Wall Street's fat paychecks may once have made economic sense. Now smaller ones do

Scott J. Ferrell / Getty

Bank executives testify during the House Financial Services oversight hearing of the Troubled Assets Relief Program (TARP).

A few years back, two finance professors at the University of Chicago set out to discover who was behind the spectacular rise in the very top incomes in the U.S. Steven Kaplan and Joshua Rauh quickly concluded that for all the outrage about the pay of corporate chief executives and their lieutenants, it didn't account for more than a sliver of the gains. And highly paid athletes and entertainers were too small in number to have much impact.

The big, big gainers, Kaplan and Rauh found, were on Wall Street. At least 2,500 people at major investment banks made more than...

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