Pay cuts for Washington, too

The critics are right. Wall Street’s remaining firms are led by managers with tin ears regarding the political climate and the effect of the $18 billion in bonuses that their employees will receive.

Yes, those bonuses represent a significant part of the annual compensation for many employees.

Some of those bonuses are contractual. And yes, the bonuses were way below those of previous years.

But, given the damage that Wall Street has helped to inflict on the economy, the bonuses, and hence the compensation packages, should have been even smaller.

The chief executives may argue that they are compelled to pay large salaries and bonuses to retain the best minds, but that doesn’t wash.

First, if the people who helped create the financial disaster are the best minds, could lesser minds have caused any more damage?

Second, who is likely to hire these great minds at their inflated salaries as the Street downsizes?

Certainly, many on Wall Street have taken big hits. Most have seen their compensation sliced; thousands of others have lost their jobs.

But they will get little sympathy because they are seen as having brought about the crisis.

In fact, compensation must never again be allowed to become as outlandish as it became during the technology and the mortgage bubbles.

At the same time, if Wall Street must trim its sails, there are more than a few other contributors to the crisis who should take pay cuts, too.

First, there are Federal Reserve Chairman Ben Bernanke and his colleagues on the Fed board. They mismanaged the money supply, which helped inflate the housing bubble, and then helped sell to Congress two ill-conceived stimulus and rescue packages.

Next, there is former Fed Chairman Alan Greenspan. As a retiree, he isn’t subject to a “downward revision in his income level,” to use a circumlocution he might employ.

Yet he would deserve a pay cut if he were still at the Fed.

Then there is Timothy Geithner, the new secretary of the Treasury and former head of the Federal Reserve Bank of New York. As a sidekick to former Treasury Secretary Henry Paulson (who also would merit a reduction if he still were on the government’s clock), Mr. Geithner helped design and implement last year’s failed bank rescue package.

Let’s not forget those in Congress who played major roles in setting the stage for the disaster, especially Rep. Barney Frank, D-Mass., and Sen. Christopher Dodd, D-Conn., who led the resistance to efforts to rein in Fannie Mae of Washington and Freddie Mac of McLean, Va., when they were clearly were becoming overleveraged.

So far, none of the Washington miscreants has taken a cut, let alone accepted responsibility for the crisis. In both New York and Washington, there seems to be more than enough cluelessness to go around.