I see that Barry Ritholtz at Big Picture sees my point about the misalignment of incentives on Wall Street, but he hasn't taken the next leap about my suggestion to bring back the partnership investment bank:
I always found it an amazing coincidence that none of the private partnerships got into any trouble. Coincidence? Perhaps not — from page 136, Bailout Nation:
More importantly, banks started adopting the “eat what you kill” compensation systems. The bonus structure, replete with short-term financial incentives, began to dominate banks. Throw in monthly performance fees and annual stock option incentives, and you end up with a skewed business model suddenly embracing quicker trading profits. ...
Putting a supertax on banker bonuses will not solve the problem. The problem is the lack of incentives to pay attention to risk management. Partnership structures will do that.
Has anyone noticed that partnerships, such as lawyers and accoumtants, rarely blow up? Even if they did, e.g. Arthur Anderson, they didn't bring down the system.