Schadenfreude alert: Subprime execs get poor, Wall Street bonuses headed down

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  • Read Later has a lovely slide show (link from Harold Maass) of mortgage industry executives who used to be really rich and now aren’t so much.

Meanwhile, Bloomberg has an article (via Trader Daily) on how the credit crunch “may cut Wall Street bonuses for the first time in five years.”

Hooray for that, I say. I’m not at all opposed to people getting rich. But I have a big problem with the size of the paychecks on Wall Street and elsewhere in the financial services business, because I think they usually fail to adequately reflect the risks being incurred. As Dennis Berman wrote in a really smart W$J column last month:

Bankers and traders get their big bonus checks every 12 months. But the risks created by their work are spread over a longer time frame. By the time the risks are revealed, be they bad loans or bad deals, it’s too late for real accountability. The checks have been cashed, and the charters booked for Nantucket.

Berman didn’t have any answer for how to fix this, and instead offered some career advice:

If you’re ever offered a chance to make short-term profits without any long-term risk, grab it and don’t let go. It can be a beautiful gig.

Well, I have a little advice for those of us unable to land such gigs: By all means kick these people while they’re down. Because most of them were probably wildly overrewarded on the way up.