There is a lot about Wall Street pay to make the
rest of us livid, or at least jealous. And now Congress seems poised to
act on it.

The House of Representatives is expected to pass on Friday a bill to empower regulators to change what the bill’s sponsor, Barney Frank, calls “imprudently risky compensation practices” on Wall Street.

Other
companies will have to face regular shareholder votes on pay, although
the votes will be nonbinding, and board compensation committees will
have to jump through more hoops.

The big winners will be
compensation consultants, for whom there are likely to be more jobs
available as conflicts of interest force companies to hire more
consultants.

I doubt all of this will hurt very much, unlike the last Congressional stab at doing something about excessive executive pay, passed when Jimmy Carter was president. That led to soaring pay and some of the abuses that now outrage people.

But neither will it do much good.

It
is galling to see executives making tens of millions of dollars for
running companies that have to be bailed out by taxpayers, but there is
little evidence that big pay — or the incentives connected to it —
caused the financial train wreck that sent the world into recession.

To
the contrary, there is plenty of evidence that no one who counted —
traders, chief executives or regulators — understood the risks that
were being taken.

A new study
shows that banks run by chief executives with a lot of stock were, if
anything, likely to do worse than other banks in the crisis.

“Bank C.E.O. incentives cannot be blamed for the credit crisis or for the performance of banks during the crisis,” states the study, by René Stulz, an Ohio State University finance professor, and Rüdiger Fahlenbrach of the Swiss Federal Institute of Technology.

“A
plausible explanation for these findings is that C.E.O.’s focused on
the interests of their shareholders in the build-up to the crisis and
took actions that they believed the market would welcome,” Mr. Stulz
said.

The chief executives were wrong, of course. Most lost tens
of millions of dollars in equity value but sold few shares before the
crisis hit.

Whatever else they lacked, they had plenty of incentive to keep their banks from failing.

But
those incentives did not matter when they should have. Bankers and
regulators believed in the “Great Moderation,” a term popularized by Ben Bernanke, then a member and now the chairman of the Federal Reserve Board, in a 2004 speech.

Thanks
in part to “improvements in monetary policy,” Mr. Bernanke said,
without excessive modesty, there had been “a reduction in the extent of
economic uncertainty confronting households and firms.” Recessions, he
added, “have become less frequent and less severe.”

Bankers were
not the only ones who concluded that the chances of a very bad outcome
were exceedingly low. As year after year went by with nothing very bad
happening, they saw no reason not to borrow more and more money to
place what they deemed to be safe bets.

It may be worth noting
that, of the 98 financial companies studied by Professors Stulz and
Fahlenbrach, the one with the most valuable holdings of stock and
options in his company at the end of 2006 was Richard Fuld of Lehman Brothers. His holdings, now worthless, were valued at $1 billion.

I
had lunch with Mr. Fuld in early 2008, after the financial crisis was
under way and less than eight months before Lehman failed. The
conversation was off the record, but I am sure he had no inkling of the
how great were the risks Lehman faced as a leader in the mortgage
securitization business.

He was later raked over the coals in
Congressional hearings about his huge compensation. That most of it was
in stock and options that he never cashed in seemed to be something
most legislators could not comprehend.

As Congress moves to do
something about executive pay, it is worth asking what would have
happened if Mr. Fuld had somehow realized in 2005 that the mortgage
business was a time bomb and had gotten Lehman out of it. Within a
year, its profits would have sagged and its share price collapsed. Mr.
Fuld would have been labeled a dunce, and might have lost his job. The
same can be said of Jimmy Cayne of Bear Stearns and Stan O’Neal of Merrill Lynch, the two runners-up in the richest bank C.E.O. sweepstakes of 2006.

President Obama
has proposed legislation to deal with many aspects of the financial
crisis, and it is no surprise that this bill is the one that seems to
be having the easiest road to passage, even though