The problem with banker pay

Krugman’s latest column is a gem.  The problem, he says, is not the level of financial-industry pay but its asymmetry — lavish rewards for short-term profits, no responsibility for long-term losses or systemic damage — and the perverse incentives that result.  Once again, it’s a case of “privatize the profits, socialize the losses.”

Judging from the quote from President Obama, it doesn’t look like this administration is going to do anything about it, though.  Sigh.

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2 Responses to “The problem with banker pay”

  1. democommie Says:

    Ranjit;

    I’m all for “Personal enrichment, public execution”.

  2. Joe Egerszegi Says:

    On the business of bankers and the whole money-fondling industry, I’d like to make two observations:

    First, if I make a tool for you, or I offer you a services, and you make a million dollars with it, am I entitled to recoup a percentage of that million dollars? Then why, when a financier touches your money to (re)invest it, are they entitled to a percentage? Are they not simply offering you a service?

    Second, a source of enormous stress on a family (with kids) is the compound interest demanded on the mortgage of that family’s home. Interest of any kind is based on payment over a period of time; the compound interest portion of a mortgage, typically amortized over many years in the future, amounts to a tax on the very people who are going to the trouble to ensure the stable population for that same future.

    Credit is fundamental to an economy, and credit is money to be repaid in the future. With little or no kids, there is either a dwindling or no economy.

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