There is nothing about interesting about banking. Simply put, it is a mind numbing job. It is a simple game of flow, doing the same thing over and over again. The only reason people flock to work on Wall Street is for the money. It is what keeps us sane/human. For a banker, salary is a minute part of his compensation. Most of the compensation comes as bonus ranging from 200% to numbers that make your heart skip a beat. This makes sense, keeping the bankers on a low retainer considering the volatile nature of M&A and corporate finance business; so when all the stars align; it leads to windfall of millions, of which parts are allowed to flow into the bankers pockets. In this world, you eat what you kill. With the rise of prop trading desks, investement banks became hedge funds where bonuses of tens of millions of dollars became common. If your desk makes a billion dollars in a year, as JM’s desk is rumered to have made, you expect a bonus pool of $100m.
The financial system needs to be restored and it has to be the bankers who do the dirty work. A pay cap is going to be counterproductive because people will simply leave a bank if they can find a similar paying job elsewhere or move to the Middle East which still has enough money to run a couple of LTCMs, where they can set up parallel hedge funds and prop desks. Another way can be to have a defered payment in shares of trading books as in a HF rather than in stock of the company to keep the risk a trader takes in check. Whatever path we take, it will take tens of years for the banks to pay the treasury back. Raising a hue over the $18 billion in bonuses given by banks on Wall Street this year is correct. Putting a cap on the salary and bonus for "kindom come" is taking it too far.
A NY Times calculation on the cost of living in NY should put things in perspective.