Via Marginal Revolution, I read this article in the New York Times about why, unlike what Obama and his team and Congress and the G20 leaders like to claim, bankers’ pay wasn’t a factor in the current financial crisis.

Still, René M. Stulz, a finance professor at the Fisher College of Business at Ohio State University, says he has been unable to find empirical evidence that incentives encouraging excessive risk-taking played a large role in the credit crisis. Professor Stulz and a co-author, Rüdiger Fahlenbrach, a finance professor at the Swiss Federal Institute of Technology in Lausanne, examined the relationship between bank performance during the crisis and C.E.O. pay incentives.
Their study has circulated since summer as a working paper from the National Bureau of Economic Research. The study found few significant correlations one way or the other, but to the extent it saw patterns, they generally ran counter to what’s often assumed. Instead of performing worse, the banks whose C.E.O.’s had the greatest incentives for excessive risk-taking fared better, on average, than others.

On this topic, read this interesting blog post by Tyler Cowen at Marginal Revolution here. And here is the testimony before Congress of J. W. Verret, of George Mason University Law School, “Unintended Consequences of Executive Compensation Regulation Threatens to Worsen the Financial Crisis.”