Not a blog but a "q-and-a" (pronounced "quanda"), this page is about the basics of economics. Its premise: there are no stupid q's. And if some a's seem dim, take heart: I can brighten them up in response to objections, corrections, refinements. Comments on posts feature yours, and my responses. Enough of you now frequent and query the quanda that I post most every day. Haven't seen your q yet? Send it again. All a's should be taken with a shaker of sodium chloride, if not a Lot's-wife's-worth. And speaking of salt, the mustache and "hair" in the photo has a lot less of that condiment, and rather more pepper, than can be seen on TV. Think of it as time travel.
Instead of Capping Pay, Could the Government Police Banks' Risk Models?
Question: Instead of the government trying to prevent risky behavior by limiting bonuses and other compensation for the best performers in the finance industry, would it be possible for the government to review risk models that banks use?
Paul Solman: Possible? Sure. But which would you think more meddlesome? More likely to be effective?
Look, I get the problem with the government taking over big banks. Potentially, it's an administrative nightmare. But if I'm the major shareholder of a bank, I can't decide how much to pay the executives?
The data I've seen appear to be unequivocal: There's no correlation between executive pay and executive performance. And I don't believe the U.S. government would have a problem getting very competent people to run the banks it has a stake in. Or let me put it more carefully: I don't believe it would have a problem getting people at least as competent as those who DID run them. And were paid queen's ransoms for doing so.
TrackBack URL for this entry: http://www.pbs.org/newshour/mt4/mt-tb.cgi/1410
Comments
Instead of Capping Pay, Could the Government Police Banks' Risk Models?
**Question:** Instead of the government trying to prevent risky behavior by limiting bonuses and other compensation for the best performers in the finance industry, would it be possible for the government to review risk models that banks use?
**Paul Solman:** Possible? Sure. But which would you think more meddlesome? More likely to be effective?
Look, I get the problem with the government taking over big banks. Potentially, it's an administrative nightmare. But if I'm the major shareholder of a bank, I can't decide how much to pay the executives?
The data I've seen appear to be unequivocal: There's no correlation between executive pay and executive performance. And I don't believe the U.S. government would have a problem getting very competent people to run the banks it has a stake in. Or let me put it more carefully: I don't believe it would have a problem getting people at least as competent as those who DID run them. And were "paid queen's ransoms for doing so":http://www.pbs.org/newshour/video/share.html?s=news01s2421q793.
