Populist Outrage Makes Perfect Sense

All it takes is $18.4 billion, and suddenly the mob is restless. Once, we were content to brush Wall Street’s gross inequities under the rug, but “we’re populists of a more fiery sort now,” writes Thomas Frank in the Wall Street Journal, “the old bromides no longer palliate.” And the outrage isn’t just, as David Brooks joked yesterday, a manifestation of the “resentments” of middle-class Washington liberals—it’s entirely justified.

The frenzied crowd realizes the truth: “Wall Street’s compensation system isn’t just aesthetically displeasing to liberal snobs. It is the very heart of the problem.” The pay-for-performance model gives executives incentives to take crazy risks, hide losses, and, in the words of one economics professor, “loot the place through seemingly normal corporate mechanisms.” Banks must overhaul the bonus system; it's good PR, and it might just save them. (More executive compensation stories.)