Should we pillory the banks?

There is a trend in power circles – attack on the banks and look good! While this is not healthy, it is very understandable.

I believe that all the banks have at least a few things to hide. Some have a lot to hide. At some places corruption is driven from the very top. Sometimes, banks cover up the damage because it could destroy the whole business. Sometime they keep doing the wrong thing in the hope that they will be able to get out before the whole house of cards crashes down. In some other cases it happens due to impossibility of policing thousands of extremely intelligent people – some of which may be crooks. Most importantly, the incentives of professionals are not aligned with that of society. More often than not, the benefits of financial bets are cornered by the finance professionals and their clients, while the downside is shared by the client and the society. Unfortunately, bankers have much power and impact of the society can be massive. Therefore, if something goes wrong, sometimes the society has to pay up to save itself. When the skeletons tumble out, there will be a loss of confidence in the market. I am not sure who to blame – for the market for having faith in the banks, or the banks for breaking that trust.

However, I do believe that the society is over-reacting and recent political actions may do a lot of harm. It is fine though - the society has the right to get screwed, and it enjoys the privilege often. Also, the bankers must shut-up. They lost the right to protest long ago and they get stop getting screwed by whining!

In such a situation restructuring of employee incentives is necessary. What shape it should take - I don't know!