In an editorial titled “They’re Coming for Your Bonus” by Peter J. Wallison in the Wall Street Journal, he talks about another Dodd-Frank financial law putting restrictions on incentive pay for financial institutions.  Like always, these sound like such great ideas on the surface, especially to the dumbed down masses of the United States.

However, if you are reading this you are not part of the masses!  It is not that all of the masses are dumb, they just fail to educate themselves.  We can hardly blame them.  The amount of information thrown at us every day is just overwhelming.  That includes, of course, misinformation and the only way to combat that is to educate oneself on every topic.  Impossible, so what do we do?

Succeeding without taking risks is an impossible expectation.

Don’t believe everything we are told unless it is by a very reputable and credible source.  Even then, we need to be skeptical.  Let’s take for example, this financial law about the bank executives.  Like I said, it sounds good on the surface.

This law says that financial executives should be required to defer 60% of their bonuses for four years.  Then, they are subject to a “claw back” for up to seven years in the event of losses attributable to poor judgement or “undue risk-taking.”  Sounds good so far, right?  We wouldn’t want those financial guys taking a bunch of risks and putting the institution at risk again, especially if it’s for their financial gain.  Well, with every action there is a reaction.

Mr. Wallison points out how this will ripple throughout our economy.  Knowing that they may be penalized, the executives will protect what is theirs, as normal humans do.  “Now imagine this scenario playing out thousands of times across the country every day for years.  You can easily see that this will result in less financial risk-taking and significant limits on available credit.  That means less growth and innovation for the U.S. economy, with fewer jobs and lower compensation,” says Wallison.

Remember, this is all on top of the normal expectations those on Wall Street have to be successful every day, anyway.  Those that fail and lose money for their place of business are already penalized with their bonuses and tend to lose their jobs very quickly.  There are always more than enough smart people standing in line to replace them.  (Government officials, on the other hand, can lose billions of dollars with no accountability and the employees are rarely even reprimanded, let alone fired.  Anyone else notice an ironic double standard here?)

The worst part is that people think this will somehow prevent another financial crisis from happening, like the one we saw in 2008.  I will leave you with Wallison’s explanation as to why that isn’t the case.

This is a barely plausible explanation for a phenomenon as widespread as the massive housing bubble that developed between 1997 and 2007, and fails to account for the deterioration of mortgage underwriting standards throughout the U.S. after Fannie Mae and Freddie Mac were subjected to the Department of Housing and Urban Development’s “affordable housing” goals.  These initially required a 30% quota of loans that Fannie and Freddie acquired to come from the borrowers who were at or below the median income where they lived.  That quota eventually rose to 56%, forced a deterioration in underwriting standards, and precipitated the subprime fiasco.

These new rules are based on the same false idea about the causes of the financial crisis that underlies Dodd-Frank, a law that has discouraged credit expansion and resulted in the 2% growth rate of the past seven years.  We should not double down on that mistake by further sapping the risk-taking that drives economic growth.”

We live in the greatest country on earth, ever.  Let’s stop the bureaucrats from regulating our ability to stay great, which requires innovation and risk-taking to move forward.