The Best Bankers Must Be Paid to Stay

Despite the uproar over bonus payments at taxpayer-supported firms like American International Group (AIG Quote) and Merrill Lynch, a simple fact stands in the way of limiting bankers' salaries: The best and the brightest must be paid to stay.

Now that populist rage has died down, with the help of regulators who realized its counterproductivity, banks are taking a stand to keep their top talent from fleeing into the arms of foreign firms, and less regulated competitors like hedge funds, private equity firms and private institutions.

A report in the Financial Times on Sunday reported that some big beneficiaries of government support, including Merrill, Citigroup (C Quote), Morgan Stanley (MS Quote) and UBS (UBS Quote), are increasing pay packages to halt the mass exodus that started to take place. The paper quoted a source saying that UBS and Merrill had lost about 25% of top talent to strong foreign competitors like Barclays (BCS Quote), Credit Suisse (CS Quote) and Deutsche Bank (DB Quote), which didn't face as stringent regulations or harsh scrutiny on executive compensation. ...