Nov. 3 (Bloomberg) -- In the musical comedy “Little Shop of Horrors,” a dangerous and gluttonous plant dubbed “Audrey II” signals its insatiable appetite for human blood with a baritone demand, “feed me.”

In the real-life Shop of Horrors, the evil plant is gone. In its place is our voracious financial industry, which has been partaking in menacing feedings while stirring up fear of the havoc to come if it doesn’t keep getting what it wants.

A year after the world’s banking system almost collapsed, you might think financial bosses would be agonizing over how they would be depicted in history books, and anyone with a job would be offering to stick around and clean up the mess for a pittance.

You’d be both silly and wrong, as we all know by now. Finance’s version of Audrey II is thrashing about with threats that, crisis or not, they’d better get their extravagant pay and light-touch regulation. Anything less and -- real horrors -- financial innovation will decline and the world as we know it will end.

We’ll get to that financial innovation silliness in a minute.

A poll of Bloomberg customers released last week revealed that 21 percent of traders, analysts and fund managers polled in the U.S. expect their 2009 bonuses to be bigger than last year. Another 24 percent expect their bonuses to be about the same, which is pretty good when you consider the employment woes of the rest of the nation. Frustrated taxpayers wonder how they got into a mess where $700 billion of their money went to bailing out people who today are poised to pocket record amounts in some cases (9 percent in the Bloomberg survey).

Argument Trumped

In the financial industry, though, the attitude of entitlement trumps any argument that there would be no job, no employer and no paycheck without the bailouts.

In fact, those Bloomberg customers said any limits on pay will boomerang. Asked “Do you think limits on executive compensation in the financial industry will do more to control excessive risk-taking or more to discourage useful innovation?” 65 percent of the ones working in the U.S. said limits on pay would choke innovation.

Knowing what we do about innovation in finance, we wouldn’t want that to happen.

Are there actually credible people worried that capitalism will be brought to its knees if restrictions on pay, and related reforms in regulation, are imposed on Wall Street?

Easing the Rules

NYSE Euronext Chief Executive Officer Duncan Niederauer, who is either tone deaf to the public’s disgust or secure in the belief that the public’s anger doesn’t matter, told the Wall Street Journal last week that he’s worried that regulatory changes in the works in Washington will determine whether New York City can compete in the world. I’m having a déjà vu moment. Didn’t we try, and fail, at the idea of ratcheting down our rules to the levels of competing countries?

The high standards of the Sarbanes-Oxley Act give “the perception of heavy regulation” on the NYSE, he said, and a proposed tax on securities transactions (intended in one bill to be used to refill the coffers Wall Street depleted) could have “disastrous consequences” for entrepreneurs trying to tap into the U.S. equity markets.

I’m glad Niederauer brought that up, because the notion of a smart person having a great idea and building a business to the point where it goes public is just what I think of when I hear the word “innovation.”

Talk of Innovation

I’m perplexed, though, when I ponder what Wall Street means when talking about innovation. That’s not for any lack of examples, but for an understanding of what Wall Street adds to the goal of smart allocation of capital when it does its innovating.

I get it when the tech geek huddles in a garage for three years with a couple of pals and comes up with a blockbuster idea that brings pleasure to consumers or profits to companies, and then takes the company public. But why am I supposed to be losing sleep that new rules might impede the creation of the new, new thing in tax evasion? Or high-frequency trading? Maybe a new flavor of collateralized-debt obligation bearing a delusional AAA rating?

If you sift through position papers of financial trade groups, there’s a lot of noise about the need for regulation. But read far enough and you hit that paragraph that explains why the writer’s constituents don’t need to be overseen with serious diligence.

And then, inevitably, you will meet with that foreboding warning that regulation will threaten innovation. In a “Dear Senator” letter published by the Financial Services Roundtable on July 8, politicians were warned that a proposed agency to protect consumers would “jeopardize the safety and soundness of many firms and stifle innovation by requiring firms to offer ‘plain vanilla’ products.”

I, for one, am willing to take my chances. Bring it on with your threats to force plain-vanilla investments on consumers. Wall Street, if you really want to frighten us, you need to do better than that.

(Susan Antilla is a Bloomberg News columnist. The opinions expressed are her own.)

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To contact the writer of this column: Susan Antilla in New York at santilla@bloomberg.net

Last Updated: November 2, 2009 21:00 EST