Bernanke Banking Proposal

The upcoming stress test of the financial industry was discussed by Ben Bernanke today. One thing he emphasized was regulators focusing on executive compensation in the banks. For banks that received bailout money, this is understandable, but he does not want to end here. Bernanke wants the government to stick its nose in these private banks and mandate their pay structure. He claims that it is to guard against payment policies that could have adverse effects on the banks long term health. But here is the beauty of capitalism, if this is the case, then these inferior institutions will fail, others will learn from the mistakes made, and create a new, smarter business to take its place. This is just another attempt to increase the size of government, with the assumption that government knows much more about how run a bank than the actual bankers, and the bankers who would take place of bankers who have proven themselves incompetent. Another disturbing proposal is to give the Treasury secretary the power to decide which troubled banks are to be fully taken over. Looking past the obvious irony that Bernanke thinks that the man who could not even figure out how to pay his personal taxes is qualified enough to decide which institutions are on the verge of failure and then be able to run them, this puts a political appointee in the president’s administration in the role of judge, jury, and executioner over private sector banks.