Warren Buffett has an elegant solution for the thorny problem of too-big-to-fail banks: Put the bankers’ bank accounts on the line.
Buffett, the chairman of Berkshire Hathaway, lashed out at the damage wrought by overpaid, unaccountable finance-industry bigwigs in his annual letter to Berkshire shareholders, released Saturday.
Buffett has been criticizing overreaching corporate managers and complaisant directors for decades. But the question of how to motivate good corporate behavior has taken on new weight as Washington debates reining in the financial giants whose missteps brought the economy to its knees two years ago.
The Obama administration last month proposed separating banks’ proprietary trading activities from their federally subsidized deposit-gathering and lending ones. Other proposed rules would increase the amount of capital banks hold against losses and how much cash they carry to deal with a surge of withdrawals.
But Buffett said there’s a simpler way to cap risk-taking: Forcing lavishly compensated CEOs to take responsibility for assessing the risks at their firms — and putting their own wealth at stake, to boot.
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Article courtesy cnn.com