Whereas I focused on the likelihood that international governments’ participation would ultimately exacerbate the problem of “too big to fail” and risk taking among large banks, Matthew Lynn argues that the big banks will leverage salary caps to hinder the one thing that could truly restrain their pay and risk taking — namely, competition:

They are talking their own book. Any controls on the financial industry will only make the existing big firms more profitable, and make it harder for new competitors to emerge. The people with most to gain wouldn’t be the general public. It would be banking CEOs such as Ackermann and Blankfein. …
It would create an effective cartel among the main, established investment banks. They wouldn’t have to worry about their best staff being poached by a rival bank offering a better deal to the star traders. That would be banned. It would, at a stroke, transfer power from the staff to the managers.

Hopefully we won’t have to find out how large a scale of damage can be done when the government-big-bank system that the internationalistas are pursuing experiences inevitable failure.