Commentary: Disincentivizing greed

From McClatchy.com - Financial reform is now the law of the land, and by reconfiguring the banking industry and siccing watchdogs on economic shenanigans, the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act is intended to help avoid another meltdown. If only. The problem with nearly all attempts at financial reform, including this one, is that they try to prevent malfeasance either by changing the economic architecture, like erecting firewalls between financial sectors, or by mandating institutional curbs, like increasing reserves. But the new law gets at only proximate causes. The system malfunctioned because the human beings who ran it were greedy and saw a way to enrich themselves. That means that the recession from which we are still reeling was primarily a result of human nature, which the latest reforms don't begin to address. Indeed, our economic catastrophe actually can be traced to government policies that encouraged this sort of misbehavior. To change that behavior and prevent future disasters, one needs a much different and, frankly, far simpler solution than the one President Obama signed - one that disincentivizes greed. Read more

Commentary: Disincentivizing greed