More business as usual

Posted: August 26, 2009 at 5:57 a.m.

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As Wall Street returns to profitability, it is eagerly returning to business as usual. Most notably, it is preparing to pay enormous bonuses, like those that encouraged the sort of risk taking that set off the financial crisis. ...

Ideally, banks would be free to compensate employees as they saw fit. But that must be accompanied by reforms that ensure that banks can no longer profit from primarily speculative activities or other excessively risky transactions, including regulating the opaque derivatives markets and imposing limits on the use of borrowed money to increase profits.

The Obama administration unveiled a broad reform plan in June. But Congress has yet to tackle the most far-reaching issues. ...

In the absence of comprehensive reform, however, rules are urgently needed to ensure that pay, at least, does not invite outsized risk taking. A recent House bill largely punted on the issue. The Senate has yet to act.

[Treasury Secretary Tim] Geithner seems to think that Americans begrudge Wall Street profits out of ignorance of the importance of healthy banks. That misses the mark.

They begrudge profits that come at the expense of others, like taxpayers, who do not share in them but are on the hook for the losses. Until the financial system is reformed to ensure that the old mistakes are not repeated, they have every reason to be angry.

- The New York Times

Opinion, Pages 4 on 08/26/2009

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