There's no doubt that an exodus of sorts is on-going at top Wall Street banks, all of whom accepted TARP funds. The latest sign: Goldman Sachs investment banker Byron Trott, who made a name for himself by wooing Warren Buffett as a client, is leaving the firm to set up his own merchant banking operation. What are the chances that Buffett will remain a Goldman Sachs stalwart? It's unclear if anyone else here has his trust. This may be an opportunity for others. 

Goldman has lost other top bankers as well. Joseph Ravitch, a media industry banker, has announced plans to leave. Energy banker William Wicker last month said he would leave. While Wicker is heading to Morgan Stanley, the big winners may be the boutiques and banks that never accepted TARP funds and thus do not face the possibility of onerous pay restrictions. And let's be clear, this is all about the pay. At Merrill Lynch, a group of 12 fig bankers decamped for Deutsche Bank, and energy and power industry banker Jonathan Grundy has announced plans to move to Credit Suisse. They are hardly alone. As for boutiques, we noted recently that Peter Solomon's company, among other boutiques, is on something of a hiring frenzy. 

These sorts of defections to non-TARP entities certainly raise the stakes for the traditional powers. You would have to think that the urge to pay back TARP funds it real. For the likes of Goldman Sachs and perhaps Morgan Stanley, this may end up being a competitive advantage. They are best positioned to pay back the funds--even though few expect it immediately--and thus offer the kind of pay that top bankers expect. I'm sure they'll be using that fact when they try to recruit and retain talent. 

Paying back TARP funds will be a trickier issue for the likes of Citigroup and Bank of America. No wonder Bank of America is talking about hiking salaries 70 percent, which will not do the trick if they want to attract top talent. All in all, a lot is riding on the stress tests. Who do you think will pay back the funds first? - Jim