Bank of England tells banks to cut back on bonuses in preparation for euro crisis.
http://www.telegraph.co.uk/finance/debt-crisis-live/8927337/Debt-crisis-live.html
But truth be known, the problem is that bankers are paid to take risks, but personally avoid the full extent of the downside when risky transactions sour; and therefore - cumulatively - there is an institutional bias towards excess risk.
Unfortunately, when big banks fail, they create a domino effect. The whole economy is taken down with them.
So it turns out taxpayers are the insurance in the event of failure. In the end, the risk taker is the taxpayer. So the taxpayer ought also to be receiving the bonuses, right?
If bankers were personally exposed to the downside as much as they are to the upside, they'd behave differently. But they are not. If they take a big risk and win, they benefit. If they take a big risk and lose, they receive a salary and don't get a bonus.
This is the equation which has to change.
If we are to have a depression, let's at least use it to change the way bankers operate.
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