27 January 2016

Reforming Wall Street

For the week of January 31, 2016

Richard Painter is the S. Walter Richey Professor of Corporate Law at University of Minnesota and co-author of “Better Bankers, Better Banks: Promoting Good Business Through Contractual Commitment.” This week, he discusses how a change in financial incentives for bankers could help reform Wall Street.

  • Part 1

    Part 1
    (1:16) Large bank settlements, like the recent Goldman Sacks settlement, are paid by the bank shareholders, not those responsible for the risky behavior; (2:18) The portrayal of Wall Street by movies like “The Big Short;” (3:10) Factors that led to risky behavior by the banks; (4:44) Responsibility of boards of directors; (6:20) Painter’s proposal to tie compensation and bonuses into the success or failure of the bank; (9:12) Why risky behavior on Wall Street often goes unpunished; (10:06) Risky behavior has declined since 2008 but the compensation system still encourages risk; (10:50) Dodd-Frank Act and bank regulations
  • Part 2

    Part 2
    (:23) Painter believes if bankers had had their own assets on the line prior to 2008, the financial crisis would have been less severe; (1:35) The book suggests banks enact these actions on their own, without congress; (2:46) Incentives for banks to reform; (3:44) If financial incentives are changed for bank executives, there would be less pressure on the SEC; (4:52) The repeal of the Glass-Steagall Act and deregulation of banks in the late-1990s; (7:50) The biggest challenges standing in the way of Wall Street reform; (9:28) The vulnerability of our economy today; (10:25) The global economy makes reform and regulations more difficult