The Obama Administration’s call for a $500,000 Wall Street salary cap and Kevin Rudd’s increasingly shrill indignation at the “greed” culture endemic to financial services may have unintended consequences.

For the best part of three decades investment banking and capital markets have attracted smart and ambitious university students from law to engineering. At job fairs around the world, investment banks attracted the longest queues, and aside from the grim years after the dot.com crash, investment banking was always the most coveted profession.

But now that the tide has turned against the industry’s street cred and blue-sky remuneration, the idea of sitting in front of an Excel spreadsheet for 14 hours a day no longer seems as sexy.

Investment bankers get paid a lot because their jobs are stressful, difficult and — at least for the first few years — terribly boring. After trudging through the mathematical hell of the Chartered Financial Analyst certification or a Masters in Applied Finance, investment bankers usually demand, and receive, big bucks.

High base remuneration wasn’t so much the problem with the risk-taking culture that led to the financial crisis — it was how bonuses were linked to risk-taking and how the watchdogs of the ratings agencies failed to see how that risk-taking was spiraling out of control.

Without the high salaries and glamour, most would not want to be investment bankers or traders. Take AJ, for example: a 23-year-old Wall Street financial analyst whose “work hard and play hard” ethic brought us the immortal phrase “models and bottles“. Without these ambitious, obnoxious, cogs in the wheel, global finance would grind to a halt. Well, now it has ground to a halt, and guess what? AJ has been fired.

The Bush Administration was dubbed the “Goldman Sachs Administration” as a reflection of the firm’s alumni in government positions. But in the wake of the global financial crisis and a new president, America is readying itself for the “McKinsey Administration”. Management consulting is back and the chino-wearing lovers of PowerPoint and management buzz words have trumped their pin-striped and Excel hot-keying adversaries, as this strange little video shows.

Obama’s “chief performance officer” Nancy Killefer — whose nomination has been withdrawn due to questions about her tax affairs — was a senior director at McKinsey (with a title like that, how could she not be?) and Diana Farrell, a director of McKinsey’s in-house think tank, has become deputy director of the US National Economic Council. Karen Mills and Michael Warren are two other ex-McKinseyites who have received top jobs in the administration.

The firm — which includes such alumni as Chelsea Clinton and Australia’s own John Eliott — tends to do well in recessions, when companies hire its highly-paid consultants to advise on cost-cutting in other areas. McKinsey and firms like it are also popular with governments that love to run commissions and inquiries.

Boston Consulting Group is handling Rudd’s early childhood policy efforts and brain-storming carbon sequestration projects. Accountants KPMG are meanwhile developing the nation’s federal infrastructure policy and Corrs Chambers Westgarth are charging $4 million for legal advice on the national broadband network. McKinsey advised the US government on sweeping changes to America’s insurance system and has since been named as a defendant in Hurricane Katrina litigation.

It’s a no brainer that the best and brightest are abandoning the investment banks in droves and joining management consulting firms. And for as long as these new captains of industry hold the policy reigns, calls for executive salary caps are likely to be few and far between.

The author writes the Wheels & Deals section on investment banking for Business Spectator.

Peter Fray

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