Is the Problem Bonuses, or Regulations?

The gist of of this piece says big bank bonuses are back, at the expense of main street.  But between the lines you see why banks are not lending:

Witness the hoopla over Goldman Sachs’ Facebook private offering, which would have allowed its wealthiest clients to buy shares of the firm before the general public could.
. . .

They have not aggressively lent money. Instead, they have hoarded capital. They have done so to pay for legal fees and for defaults on mortgages and credit cards.
. . .
Part of the problem is that the regulations designed to prevent a repeat of the crisis of 2008 — including demands for much higher capital reserves, instituted as part of the Basel accords last summer — have incentivized banks to reduce risk, increase their reserves and tighten lending standards. Instead of taking the government bailouts and then bolstering a weak economy by lending to creditworthy individuals and businesses, banks bolstered their own weak balance sheets.

On the flip side, the regulations do little to remove systemic risk.

Here. Regulations prevented anyone from investing in Facebook.  Regulations divert resources to complying with rules instead of creating wealth.  Regulations assume the people doing the regulating know the effects and consequences of them. They don’t, and we all suffer.  Well, not all of us.  Politicians and regulators get to play hero, then they blame others when their schemes cause more problems.

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