The incentives still aren’t great, it’s true. But a lot of things are better. The Volcker rule discourages investment banks from making big directional bets wit

The incentives still aren’t great, it’s true. But a lot of things are better. The Volcker rule discourages investment banks from making big directional bets with shareholder money, and the Fed stress tests force them to regularly consider and mitigate downside risks. Both of these things are gameable but at the same time have real effects. Also, like, Lehman Brothers collapsed in 2008, and Bear Stearns and Merrill Lynch both got sold at fire sale prices. Shareholders don’t want those risks, and even if managers are too insulated from financial consequences of a collapse they probably care about reputational risks as well.