re:  Bankers' Bonuses:  Fed should rein in compensation that promotes unacceptable risks

In stating that the US financial and banking system is still not "fixed" after last year's near collapse, the Chronicle editorialists correctly identify that unsound incentives promote unsound risk-taking.  Unfortunately, they focus on the symptom — executive compensation — rather than the disease itself.  It wasn't "bankers' bonuses" that promoted the financial meltdown, it was government policies that incentivized companies to make loans that couldn't be repaid.   Free market capitalism is based on risk and reward; however, when the government promotes policies that allow companies to keep the reward but makes taxpayers bail out failure, then you get financial institutions taking on levels of risk that would otherwise be unacceptable.

Every gambler knows there's nothing better than playing with "house money", and there's no bigger "house" than the United States government.  Focusing on executive compensation as a fix for our financial situation is like treating a gambling addict by limiting how much he tips the dealer.

Sincerely,
Dave Smith
Houston, TX