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 every Republican voted against it in the House Financial Services Committee. The banks probably realize it won’t make much difference and are doing their most intensive lobbying elsewhere.

I asked Professor Stulz what he thought of the bill. “It is hard to believe that regulators will be better at devising compensation plans with proper incentives,” he said. “Properly designed capital requirements are a much more efficient approach to regulate the risk of financial institutions than fiddling with compensation.”

Indeed, much of the financial “innovation” of recent years consisted of bankers coming up with ways to evade capital requirements. The regulators are now trying to deal with that, but their efforts are handicapped by bankers warning that they will maker fewer loans if capital rules are tightened.

That said, the bill could help some. The Sarbanes-Oxley law, passed in 2002, does seem to have resulted in board audit committees taking their jobs much more seriously. It would be good if the same happened at compensation committees. Perhaps it will do some good to tie compensation to long-term results, or to force executives to hold stock rather than sell it quickly when options vest.

Still, as Alan Blinder, the Princeton economist and former vice chairman of the Fed, wrote recently in The Wall Street Journal: “The executives, lawyers and accountants who design compensation systems are imaginative, skilled and definitely not disinterested. Congress and government bureaucrats won’t beat them at this game.”