Long before George Bailey wrestled with Mr. Potter in "It's a Wonderful Life," the public decried the pay of top executives in large financial institutions. Overpaid bank executives are the villains in regulatory morality tales and feed distorted public perceptions about bankers' pay.

It is true that the very top bank executives make more in a year than most of us make in a lifetime, but compensation of this magnitude is rare. Most banks in this country are small businesses...