Blaming “Banks Gone Wild”

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Worthwhile reading this weekend: Paul Krugman’s column in The New York Times headlined, ‘Banks gone wild.’ Krugman looks at the mortgage mess and sees, at its core, a failure of corporate governance. How else to explain that CEOs who damaged their companies with bad bets on mortgage-backed investments still made out like bandits?

‘Executives are lavishly rewarded if the companies they run seem successful: last year the chief executives of Merrill and Citigroup were paid $48 million and $25.6 million, respectively. But if the success turns out to have been an illusion — well, they still get to keep the money. Heads they win, tails we lose.’

Commentary: I agree that executive compensation is an ongoing outrage -- and proof, as Krugman argues, that the Enron scandal failed to break up, or even slow down, the no-questions-asked, back-slapping, check-writing party in America’s corporate boardrooms. But I don’t think it’s the main factor in the credit and mortgage mess we’re now witnessing. This is the price we all pay for lax regulation and oversight of the lending industry, and for a consumer culture that has come to believe that debt leads to wealth.

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Hat tip: Better Village, via email