There was an article in the New York Times recently with the title 'What's Really Wrong With Wall Street Pay?' In the article, the writer discusses a problem world leaders want to do something about but are not sure how. How do you stop compensation packages for bankers and traders in global markets from encouraging them to take the kinds of wild risks that have done so much damage to the global economy? I wish the leaders the very best of luck in dealing with that one. Success in the endeavor is far from certain...to put it gently.
What caught my eye as I was reading the piece is what the writer says bankers call the "I.B.G-Y.B.G." problem, as in 'I'll be gone and you will be gone'. It is the moral hazard problem. Traders in global markets take incredible risks and recklessly, they collect their bonuses and move on. The firm takes all the risk. Well, it turns out that taxpayers take risks as well, since governments have had to bail out so many banks deemed too big to fail.