Want to make your head spin? Try to reconcile these two comments from Morgan Stanley (NYSE:MS) CEO John Mack:

October 2009: "From my view, I'm a capitalist. I think it should be left to us."

November 2009: "Regulators have to be much more involved. We cannot control ourselves."

Huh?

To be fair, Mack's first comment regarded compensation, while the second was in response to Wall Street's risk-taking.

In essence, he's saying, "Tell us how much risk we can take, but then leave it to us to figure out how much we're worth for taking that risk."

You may disagree, and at the risk of blowing up my email inbox with hate mail, I'd actually say that makes a good amount of sense. And bravo to Mack for being the first Wall Street CEO to admit that, left unchecked, risk-taking spins dangerously out of control.

Wall Street should be regulated in terms of how much risk it's able to pile on, particularly if that risk has the potential to annihilate the rest of the economy. And when you're a multitrillion-dollar company, it does. Even hardcore "leave-'em-alone" defendants cave to this reality. As Alan Greenspan told the Economic Club of New York earlier this year:

I still believe that self regulation is an essential tool for market effectiveness -- a first line of defense. But, it is clear that the levels of complexity to which market practitioners, at the height of their euphoria, carried risk management techniques and risk-product design were too much for even the most sophisticated market players to handle properly and prudently. Accordingly, I see no alternative to a set of heightened federal regulatory rules for banks and other financial institutions.

Nonetheless, Mack's point about leaving compensation up to the company is spot-on.

First, by regulating risk-taking, you're already by extension influencing compensation. Tell Goldman Sachs (NYSE:GS) it can't lever its balance sheet over five-to-one, and watch how quickly compensation falls off a cliff. Reinstate Glass-Steagall, and see what happens to traders' pay at JPMorgan Chase (NYSE:JPM) when they can't gamble with Federal Reserve funds.

What we're poking at here, and what Mack's compensation comment was in reference to, is the government-appointed pay czar who's setting compensation at several Wall Street banks. Hoards of protesters have bashed the pay czar's role as oppressively unjust.

But is it? The companies under pay czar rule are those where the government effectively owns the shop. It's the controlling shareholder. The owner. In some cases, the common shareholder voter. We're talking AIG (NYSE:AIG), Citigroup (NYSE:C), and Bank of America (NYSE:BAC), all three of which count Uncle Sam as the single largest stakeholder.

No regulator has ever told American Express (NYSE:AXP), for example, what it can or can't pay its employees. It repaid bailout funds, and is now free to shell out as much as its owners will put up with. When the government is the owner, hey, so be it. That's the destiny a company has brought upon itself.  

What do you think? Fire away in the comment section below.