Going Back to the Partnership StructureTaleb suggests that investment banks go back to what they used to look like a few decades ago — where they were partnerships instead of publicly traded companies. This idea does have some attractive features, as the employees all share in the losses. But that also makes it somewhat unattractive for certain employees: if one trading group has a miserable year, then everybody suffers.Here’s the problem: investors love financial firms. Taleb oddly points to the recent failure of MF Global as an example of the dangers of excessive risk-taking. But that situation actually demonstrates exactly what should happen. A financial firm took big risks that went bad, and it failed. Its investors lost money. No investor was coerced to put money into MF Global. If they didn’t like risk taking, then they could have invested in a utility, a Dow component, or a U.S. Treasury. They knew what they were getting into and wanted a chance to reap the significant return that a company like MF Global offered.

[The article suggest to me that the author isn’t familiar with NNT’s various commentary on the banking situation. Certainly NNT doesn’t suggest that curbing bonuses alone will fix anything, and he has been one of the loudest proponents of getting rid of banks that are ‘too big to fail’ since the crash began. See: Ten principles for a Black Swan-proof world Published: April 7 2009 20:02 JohnH.]

Full Article: No, Wall Street Bonuses Aren’t Destroying the Economy – Daniel Indiviglio – Business – The Atlantic.
Hat Tip to Dave Lull.