The Real Banker Boondoggle

When the government put money into these institutions last year, the bankers who made the mistakes were not asked to help rebuild the bank's capital as a condition of their bailout. The cheapest form of private financing would have been for accrued managing-director bonus pools to have been channeled into deferred compensation subordinated to the taxpayer funds. In most businesses that lose money, owners have to put capital in rather than take money out--as banks well know, since their core function as lenders is telling borrowers how to protect their businesses' viability.

Despite last year's bonus reductions, many recipients of public support still allowed senior employees to take significant cash out. They also awarded new grants of restricted stock at historical stock-price troughs, which turbo-charges compensation when the market recovers (as it recently has--thanks, of course, to all those government interventions).