Market Collapse Does Not Indicate Executives Failed
I loves me some Gretchen Morgenson. She’s one of the few folks who have been paying attention for the last few years, and constantly pointing out "you know, I do believe that the financial sector may be without proper attire. Indeed, it might just be that the sod is 3 sheets to the wind, buck naked and running down Wall Street screaming "money, money, money! Give it all to me! To me. It’s all mine! Ahahahahaaha!"".Or somesuch. Point being that Gretchen has known that that the Emperor didn’t have any clothes and he was planning on stealing everything that wasn’t nailed down. So I’d just like to point out something I expect she’d agree with (er, in a more genteel fashion):
…whatever the number is, it will also represent, in stunning red ink, the cost to society of financiers who are shortsighted and greedy and regulators who don’t regulate.
Must be read while remembering this line:
And taxpayers weren’t supposed to be left holding defaulted mortgages and abandoned homes while executives who presided over balance sheet implosions walked away with millions.
See now, here’s how this works. If the suckers don’t make sure the executives who profited from the last seven years of debauchery don’t suffer for it, they’ll do it again. Why shouldn’t they? They got stinking rich, and we got stuck with the bill? What reason could they possibly have to not do it again?
As for the regulators, they are all captured either by the revolving door between industry and government or by academic ideology which doesn’t really believe in regulation and which believes that risk can be managed through mathematical models, without recognizing the fundamental limitations of mathematical models – that even on the rare occasions when they work, they don’t work if the numbers in are wrong, and those numbers are always wrong if it’s in people’s interest to lie about them and you don’t bother to check because it’s in your interest to let them lie.
Regulators who don’t believe in regulation can’t regulate. Executives whose real job is to grow their bonuses will do that, no matter what the cost to anyone else.
And until we remember rule #1: "don’t reward people for bad behaviour" this sort of thing will just keep happening.