The Shrill One has a typically good column today setting forth many of the crucial issues of the upcoming financial regulation struggle. As they say, read the whole thing. Krugman says that the current regulatory structure allows egregious conflicts-of-interest, in which bankers get huge bonuses for taking unreasonable risks that threaten the financial system.
But the third-to-last paragraph may be the most important. Because of these bizarre conflicts-of-interest,
reform really should take on the financial industry’s compensation practices. If Congress can’t legislate away the financial rewards for excessive risk-taking, it can at least try to tax them.
If taxing certain kinds of compensation practices can reduce the risk, then that means that a new package of tax incentives and disincentives can plausibly be included in a budget reconciliation package. And that means that Joe Lieberman, Ben Nelson, Blanche Lincoln, Kent Conrad, and Mary Landrieu will not be able to hold the rest of the country hostage. (The question, as always, will be whether such provisions are only “incidentally related” to the budget, about which more later.).
Of course, it’s hardly optimal to use a tax strategy for financial regulation simply because this will prevent an assured Republican filibuster. But you regulate with the filibuster rules you have, not the filibuster rules you would like. At least until January 2011.
PS In any event, compensation reform should be part of a free-standing bill; I will be happy to see Richard Burr and David Vitter, while campaigning for re-election explain why they are joining a filibuster of it, as well as every GOP candidate explain why they would do the same thing.