[captainobvious]

The 500k limit is only on executives of banks that receive future extraordinary assistance from the government--the execs are free to find jobs elsewhere if they don't want the restrictions. The banks are free to not take the assistance if they can maintain a healthy capital level without it. With fractional-reserve banking that is the condition they implicitly agreed to in exchange for the ability to conjure money from the (almost) ether.

[tptacek]

It also only applies to the top N executives at those firms, where last I checked N was 5.

[byrneseyeview]

Seems like there's a glaring loophole there. Let's say they want to pay their top five people ten million dollars each. And let's say they can think of five VP-level people who should be earning around $500K each. Why not say "Oh, these VPs are crucial to our survival. They're worth $20 million a year. Sadly, we can only pay them $500K of that." At that point, the VPs get about what they would normally get, and the traders can safely be paid $10 million a year.

Or am I misunderstanding the cap?

[micks56]

I guess it depends on the final drafting. Drafting the cap as "top 5 highest paid people can't make more than $500k" should solve the loophole you just wrote about.

[tptacek]

Drafting the cap as "the top 5 highest paid people can't make more than $500k" isn't the same as a $500k cap on the top 100,000 employees?

[micks56]

If you sort employees by pay it is the same. But if you sort employees by power it might not be.

For example, some sales people at tech companies make much more money than mid-level managers taking home a couple hundred thousand dollars per year. Some of those sales people will make more than the senior level executives. Which one is more important and is higher rank is up for debate.

In my comment above I tried to explain a way to fix the loophole that byrneseyeview listed. Saying nobody makes more than $500k is a way to fix that.

[natrius]

You say that as if the right to operate a fractional reserve bank is granted by the government. Without a government, fractional reserve banking would still happen, and people would put their money in banks that had good reputations.

I find the aversion to fractional reserve banking that is frequently displayed on the internet quite odd.

[MaysonL]

Without a government, fractional reserve banking would still happen, and people would put their money in banks that had good reputations.

This is true, but fractional reserve banking is inherently unstable: bank runs happen, and will happen (eventually) to any bank without government guarantees.