I have fixed feelings about this, and I will explain why a little further down.
An Article in the New York Times Dealbook Column asks a question whether Wall Street Regulators or Watchdogs should get performance bonuses.
Maybe someone deserves a bonus.
Like someone who sniffs out the next Bernie Madoff. Or jousts with tomorrow’s gonzo bankers. Or defuses the Next Big Crisis in whatever Next Big Thing is dreamed up by Wall Street.
Someone, in short, who regulates.
It is clear that the nation’s financial regulators were no match for Wall Street last time. The financiers were always one step ahead. But maybe that isn’t surprising. The financiers, after all, have a big incentive to outsmart the financial police. It is called a bonus. Wall Street lures a lot of bright minds with money. How can federal agencies compete? They can’t.
So, of course, The Government of Singapore’s head honcho says we ought to incentivize watchdog process.
Tony Tan Keng Yam, deputy chairman and executive director of the Government of Singapore Investment Corporation, suggested that one reason American regulators fell down on the job was that they were paid too little.
“You must have as good people working in the government in the regulatory authorities as those that are working in the private sector,” Mr. Tan said. “You do need, particularly in these very difficult times, capable people in central banks, in government, in the Treasury who can effectively supervise.”
Mr. Tan knows about this firsthand. He is a former regulator himself, and Singapore has a different view about compensation.
“We pay our politicians and our government servants very well,” he said. “We lock remuneration to the market.”
While Singapore’s watchdogs aren’t paid enough to afford private planes, some in top positions make seven-figure salaries.
At first blush, this would seem to be a great idea; however, if you think about it closely, this would not be such a good idea. Because of the following:
Some at Davos thought the bonus idea could work. But anxiety over that approach was palpable. “They already treat us like criminals,” one hedge fund manager said.
A few said giving bonuses to regulators would be like giving bonuses to the police for issuing speeding tickets. Maybe the regulators, like Wall Streeters, would start thinking about the money, rather than what is right. But maybe that’s exactly what Wall Street needs to slow down.
I must say, that I highly disagree with this idea. Why? While I believe that moderate regulation is a good idea on Wall Street; I believe that incentivizing the Wall Street watchdog process will result in a overzealous regulatory process, that will be solely based upon monitory compensation. This would be absolutely disastrous to the free market process in America. As well all know we already law enforcement that borderlines upon a police state. Doing this to Wall Street would cause a fear mentality amongst the financial sector and discourage investment.
We need regulation, not a financial police state.