Congress has made “progress” in reigning in risk-based compensation on Wall Street, a top Democratic legislator told CNBC Monday.
Rep. Barney Frank (D-Mass.), co-author of the Dodd-Frank law, said legislative efforts succeeded in discouraging the “perverse incentive” of the past by prompting companies to provide “more compensation in stock that is not going to be paid out for awhile.”
He has cause and effect backwards. The cause of the problem is that government guarantees of bailouts create the “perverse incentive” for people to take risks. Frank, and most other politicians, would rather keep the bailout guarantee in place because it gives them more responsibility. Here.