Rewarding bad behavior

When money managers are asked why they deserve tens of millions of dollars for pushing around other people’s money, the answer is always, “the risk.” They took the risk; they made the bet and won. To the victor go the spoils.

That makes a lot of sense. When you take a big risk, you deserve to make a lot of money. You deserve the beachfront house, the private jet, the second home in Aspen. Sure, that’s the same thing drug kingpins say, but there’s one big difference: When drug dealers make the wrong bet, they go to jail. Then money managers lose a bet, they get a bonus.

“Oh,” you might say, “but the money managers didn’t break the law.” Really? Who told you that? Oh, the money managers.

I had a friend who chased down a purse-snatcher in Manhattan once and tackled the thief in a busy midtown crosswalk. The first thing out of the purse-snatcher’s mouth was, “I didn’t do anything!” He kept yelling that at the top of his lungs. When the police arrived, they wanted to arrest my thief-tackling friend instead, until the woman whose purse was stolen finally set them straight.

So all the Wall Street money managers are yelling that they didn’t do anything. I keep wondering, when are all the people whose purses were stolen going to set them straight?

It seems to me that if you’re going to be rewarded for taking a big risk and winning, you should be punished for taking a big risk and losing. Even if you’re a banker or a stockbroker. Even if you went to Harvard or Yale.

There’s a reason we don’t give gold medals to the people who come in last at the Olympics. It doesn’t mean they are bad athletes — after all, you have to be pretty good just to compete in the Olympics. But they didn’t win. So why is it that if you’re a money manager, you can come in last place and win a golden parachute?

If risk is the thing that determines how we reward people, why aren’t our combat troops making bags full of money for going to Afghanistan? Aren’t they taking a risk? Aren’t they risking a lot more than any stockbroker or banker? What about our police officers and firefighters? Wouldn’t you say they’re in risky professions? By Wall Street logic, they should all be paid $100 million a year for what they do. Maybe more.