Inside Financial Services


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Sheila Bair says one way to force Congress to do a better job tackling the nation’s problems would be to pay Congressmen in Treasury debt:

For instance, one-half of compensation for corporate directors is frequently paid in stock, which they must hold for several years. The idea is to align their economic incentives with the long-term profitability of the corporation. There is no stock ownership in the federal government, obviously, but we do issue a lot of debt. . . . So here is an idea: Let’s start paying members of Congress and the President half of their compensation in 10-year Treasury debt, which they must hold until maturity. [Emph. added]

The woman’s clearly having trouble coming up with fresh topics for her Fortune column. . . . Let’s just say paying managements and boards with stock may not be the great problem-solving incentive-aligner Bair imagines. If it were, the panic of 2008 probably wouldn’t have happened. . . .