Great news from Wall Street: banker bonuses are expected to fall between 20-30% this year. Though there’s still 70% to go, this is a huge victory for the Occupy Wall Street movement. The driver of these drops was last year’s financial reform act, Dodd-Frank, which made it harder to raise banker bonuses. This report confirms previous stories that Wall Street traders were getting less generous packages than they had been expecting.
This is just another example of how smart government regulation can improve the way that banks function. Despite fairly consistent derision from Republicans, it looks like the much-debated financial reform act is doing exactly what it should — stopping Wall Street bankers from amassing even more wealth and influence. It also levels the playing field for small banks in a lot of ways.
That said, a mere quarter drop in Wall Street bonuses is not enough. Nassim Taleb, a former Wall Street trader and current risk specialist, recently wrote in the New York Times that the best way to safeguard the economy is to make sure “Any person who works for a company that, regardless of its current financial health, would require a taxpayer-financed bailout if it failed should not get a bonus, ever. In fact, all pay at systemically important financial institutions… should be strictly regulated.”
That’s a great idea for a lot of reasons — most importantly that it stops rewarding traders from making risky and short-sighted trades. Indeed, there’s no way for the economy to grow in the long-term without addressing the inherent conflicts of interest that are in the banking sector.
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