The New Wall Street: "Brain Drain" Threat Legit as Boutiques, Foreign Firms Rise

Contrary to popular opinion and the view of many politicians, the "brain drain" issue on Wall Street is real, says Dave Kansas, author of "The End of Wall Street as We Know It." Kansas, a Wall Street Journal contributing editor, notes the concurrent trends of foreign-born workers returning to their home countries and Wall Street's homegrown "risk-takers" joining smaller firms or opening their own boutiques.

In other words, when CEOs like Morgan Stanley's John Mack and Citigroup's Vikram Pandit complain about the risk of losing the "best and brightest" if the government imposes onerous restrictions on compensation, there's validity to their claims, Kansas says.

These trends - compensation restrictions, the rise of boutique firms, more competition from international competitors and big shops becoming more risk-averse - come in the wake of a largely self-made cataclysm that hit Wall Street in the past 18months. And Kansas notes it's "early innings" in terms of both the industry's transformation and the new regulatory environment that's certain to come down the D.C. beltway.