Krugman: Populism is Good Economics

bankerPaul Krugman, in his column of September 20th, talks about how the Federal Reserve, “now awakened from its Greenspan-era slumber,” is considering imposing new rules on financial-firm compensation (to reward long-term investment success, rather than merely short-term profits).

But, he recognizes that “the industry — supported by nearly all Republicans and some Democrats — will fight bitterly against these changes.”

“I was startled last week when Mr. Obama, in an interview with Bloomberg News, questioned the case for limiting financial-sector pay: “Why is it,” he asked, “that we’re going to cap executive compensation for Wall Street bankers but not Silicon Valley entrepreneurs or N.F.L. football players?”

That’s an astonishing remark — and not just because the National Football League does, in fact, have pay caps. Tech firms don’t crash the whole world’s operating system when they go bankrupt; quarterbacks who make too many risky passes don’t have to be rescued with hundred-billion-dollar bailouts. Banking is a special case — and the president is surely smart enough to know that.

All I can think is that this was another example of something we’ve seen before: Mr. Obama’s visceral reluctance to engage in anything that resembles populist rhetoric. And that’s something he needs to get over.”

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