Paging Mr. Orwell, Please Pick Up the White Courtesy Telephone

Not entirely apropos of Jim Manzi’s latest, here are Bloomberg News’ top financial news stories as of five minutes ago:

U.S. Stocks Fall on Drop in Philadelphia Manufacturing Index, Merrill Loss

Bernanke Says Fiscal Stimulus `Could Be Helpful,’ Supplement to Rate Cuts

Merrill Has Record Loss on $16.7 Billion Writedown for Failed Investments

MBIA, Ambac Slump, Default Risk Soars on Concern About Loss of AAA Ratings

U.S. Housing Starts Drop More Than Forecast; Manufacturing Gauge Tumbles

Fishman’s Sailfish Credit Hedge Fund Loses Half Its Assets, Investors Say

Wall Street Bonuses Reach Record $39 Billion as Shareholder Losses Mount

The thing is, the key quote in the last story on the list is actually correct: “People in New York in the world of investment banking will understand it. It’s critical that pay is still there or you’re going to lose really good people.’‘ Even in a terrible year, Wall Street firms are conscious that they are in an arms race with independent outfits like hedge funds that they cannot afford to lose. I understand that last quarter Merrill paid out more in compensation than it earned in revenue. That’s revenue, not earnings – top line, not bottom line. And that money comes out of the pockets of shareholders, most of which are institutional investors who are more than capable of defending their economic interests and who have already taken a shellacking in the stock. And yet they cannot afford not to pay.

It’s a structural problem, and it has broad implications for the nature of American society, for industry and, particularly, government, which is also in an arms race for talent that by some measures it has been losing. When Barack Obama patted himself on the back for not taking a high-paying Wall Street job, I wasn’t inclined to snark at him for it because I really do want smart, talented, highly-motivated people to work as soldiers, doctors, teachers, engineers, etc. – all professions that are losing out in the arms race. Community organizer ranks below pretty much that whole list in my personal noble-calling heirarchy. But anybody who thinks they have the talent and the stamina to play the money game, and passes it up because of something they believe in, gets at least some props in my book.

Of course, this time of year I’m just waiting on pins and needles to learn whether I get to be part of the problem.