The Associated Press reports that the banks weren’t the only ones handing out bonuses:
“Banks weren’t the only ones giving big bonuses in the boom years before the worst financial crisis in generations. The government also was handing out millions of dollars to bank regulators, rewarding “superior” work even as an avalanche of risky mortgages helped create the meltdown.
The payments, detailed in payroll data released to The Associated Press under the Freedom of Information Act, are the latest evidence of the government’s false sense of security during the go-go days of the financial boom. Just as bank executives got bonuses despite taking on dangerous amounts of risk, regulators got taxpayer-funded bonuses despite missing or ignoring signs that the system was on the verge of a meltdown.
The bonuses were part of a reward program little known outside the government. Some government regulators got tens of thousands of dollars in perks, boosting their salaries by almost 25 percent. Often, though, rewards amounted to just a few hundred dollars for employees who came up with good ideas.
During the 2003-06 boom, the three agencies that supervise most U.S. banks — the Federal Deposit Insurance Corp., the Office of Thrift Supervision and the Office of the Comptroller of the Currency — gave out at least $19 million in bonuses, records show.
Nearly all that money was spent recognizing “superior” performance. The largest share, more than $8.4 million, went to financial examiners, those employees and managers who scrutinize internal bank documents and sound the first alarms. Analysts, auditors, economists and criminal investigators also got awards.
After the meltdown, the government’s internal investigators surveyed the wreckage of nearly 200 failed banks and repeatedly found that those regulators had not done enough…”
My Comment
How to react to this? Weep….tear your hair out?…..roll on the floor laughing….throw up?
A bit of all.
The salient points:
1. Giving bonuses/incentives for “superior performance” doesn’t work, either in the public or so-called private sector (pseudo-private). The next time anyone makes that argument, rub this article in their nose.
2. Sacking is the key. Every regulator who didn’t sound the alarm over the last decade needs to be demoted and/or sacked. At the very least, the department gets a 25% cut. Or better yet, throw out all the “financial examiners.” Obviously, the job means zip. Hire a team of snake-charmers, dancing bears, or g-stringed pole-dancers……you’d at least get a laugh for your money.
3. The only way to get any real information out of the government is through a Freedom of Information Act request.
4. “Regulatory capture” – the corruption of the government by the people it’s supposed to be regulating – is clearly only one part of the problem. The more intractable problem is bureaucratic empire-building. You don’t need other people to corrupt government officials. They carry the germ themselves, because they aren’t accountable to the market for excesses and mistakes.
5. The underlying problem is the artificial boom. It pushed prices of everything sky high and gave everyone a false sense of prosperity. Naturally, the idiots broke out the champagne and started pinning gold medals for genius on their chests.
6. The mob likes flattery. The boom flattered everyone…