FCIC report: What if the SEC paid like Goldman Sachs?
The report by the Financial Crisis Inquiry Commission, released Thursday, finds that--surprise!--leaders of banks, regulatory agencies and the federal reserve actually do have to take responsibility for what happened leading up to the financial crisis. The disaster was avoidable, the commission finds, warning signs were ignored and there's plenty of blame to spread around. "Some on Wall Street and in Washington with a stake in the status quo may be tempted to wipe away from memory the events of the crisis, or to suggest that no one could have foreseen or prevented them," the report says. They could have.
The commission found that among the many causes of the crisis--and this is even less surprising--was the compensation of bankers and traders. The opportunity to earn aggressive incentives pushed up the risk bank employees were willing to take on, while stock-option bonuses motivated bank managers to wield leverage in hopes of getting higher returns.
What struck me most in the coverage about this entirely predictable finding was the idea not just that high compensation for bankers caused traders to take on more risk, but that regulators couldn't get the best talent to monitor the banks because they weren't able to issues salaries and bonuses on par with their subjects. "Wall Street firms' soaring pay pushed traders to disregard risk," wrote Bloomberg reporters Hugh Son and Michael J. Moore, "and limited regulators' ability to lure top talent to police banks."
Which leaves me wondering: What if the SEC paid the same as Goldman Sachs? It's a completely rhetorical question, of course. But consider it for a moment. If regulators were incented to stop fraud and prevent future financial apocalypses on the same scale that traders were rewarded for selling worthless derivatives, we'd surely be in a very different place today. The best talent coming out of our best universities might not immediately be shipping off to Wall Street, but to Washington instead.
That might result in a wholly different problem, of course, as overzealous regulators tried to make their bonuses by going after small-potatoes corporate peccadilloes, rather than spotting potentially systemic crises. And it disregards the psychic rewards government employees receive for doing work that benefits the public.
While this is little more than fantastical musing--paying government employees on par with Goldman Sachs, obviously, will never happen--the commission's finding still serves as a reminder that public service may not be enough to lure the best and brightest. These are critical jobs monitoring some of the world's largest institutions, which have grown so large as to be able to enact financial pain and suffering not only on themselves, but on the economy at large. Policing them should at the very least be compensated appropriately.
January 28, 2011; 9:11 AM ET |
Save & Share:
Previous: If business should invest during tough times, why not government? | Next: Egypt: Obama's communication highwire
Please email us to report offensive comments.
Posted by: mibrooks27 | January 31, 2011 8:09 AM
Posted by: Byrd3 | January 31, 2011 7:24 AM
Posted by: gasmonkey | January 31, 2011 6:17 AM
Posted by: tmaffolter | January 31, 2011 2:59 AM
Posted by: certified1 | January 31, 2011 12:38 AM
Posted by: Nymous | January 30, 2011 2:15 AM
Posted by: edwardallen54 | January 29, 2011 11:54 PM
Posted by: steveandjanereed1 | January 29, 2011 8:08 PM
Posted by: iculus | January 29, 2011 7:16 PM
Posted by: cdierd1944 | January 29, 2011 11:34 AM
Posted by: dcone | January 29, 2011 10:50 AM
Posted by: BlueTwo1 | January 29, 2011 10:47 AM
Posted by: dcone | January 29, 2011 10:32 AM
Posted by: dcone | January 29, 2011 10:29 AM
Posted by: knowscience | January 29, 2011 6:14 AM
Posted by: rappahanock | January 28, 2011 8:08 PM
Posted by: spike591011 | January 28, 2011 6:15 PM
Posted by: socallocal | January 28, 2011 3:46 PM
Posted by: Itzajob | January 28, 2011 1:30 PM
Posted by: bdg226 | January 28, 2011 1:29 PM
Posted by: kchses1 | January 28, 2011 1:26 PM
Posted by: laajbi | January 28, 2011 1:21 PM
Posted by: staticvars | January 28, 2011 1:20 PM
Posted by: shadowmagician | January 28, 2011 12:39 PM
Posted by: SETinVA | January 28, 2011 12:33 PM
Posted by: hared | January 28, 2011 11:31 AM
Posted by: Clemmonswilliam | January 28, 2011 10:58 AM
Posted by: newtodc1 | January 28, 2011 10:40 AM