The Wall Street Journal reports that the Federal Reserve is proposing to regulate bankers' pay, giving itself the option to intervene if compensation schemes give key employees the incentive to bet the franchise on cockamamie ventures.

The Fed's plan would, for the first time, inject government regulators deep into compensation decisions traditionally reserved for the banks' corporate boards and executives.

Under the proposal, the Fed could reject any compensation policies it believes encourage bank employees -- from chief executives, to traders, to loan officers -- to take too much risk. Bureaucrats wouldn't set the pay of individuals, but would review and, if necessary, amend each bank's salary and bonus policies to make sure they don't create harmful incentives.

Anybody who appreciates the many benefits of capitalism and free enterprise ought to be creeped out by what's going on. On the other hand, Wall Street virtually asked for this to happen. Don't blame the Fed. Blame the big New York bankers, who betrayed their shareholders and betrayed their system.