Killing the messenger has been around for a very long time. In our day, we mostly don't shoot them (at least not in so-called "civilized countries"), but "it is still worth a man's neck to disturb an emperor's image. Nowadays the axe falls more subtly and the execution may be postponed, but sooner or later it comes." (citation in Wiki link above.)
Why not reward whistleblowers instead? If we were to reward whistleblowers, rather than killing them—figuratively, if not literally—we would have to reward them handsomely. Why? Because in most cases whistle blowing is a career-ending if not a job-ending move. Over at Macroeconomic Resilience Ashwin Parameswaran champions whistleblowing:
Compared to other whistleblowers, employees have the best access to the information required to uncover fraud. They also possess the knowledge to analyse and parse the information for any signs of fraud. This is especially important in a field such as banking where outsiders rarely possess the knowledge to uncover fraud even when they possess the raw information….
[M]onetary incentives have an even stronger role to play in uncovering fraud in banking. The extremely high lifetime pay expected in the course of a banking career combined with the almost certainly career-ending implications of becoming a whistleblower means that any employee will think twice before pulling the trigger. Moreover, the extremely specialised nature of the industry means that many senior bankers have very few alternative industries to move to. …
The focus must be not to keep whistleblowers from losing their jobs but to compensate them sufficiently so that they never have to work again. As it happens, the scale of fraud in financial institutions means that this may even be achieved without spending taxpayer money. The whistleblower may be allowed to claim a small percentage of the monetary value of the fraud prevented from the institution itself, which should be more than sufficient for the purpose.
There is little doubt that if Brooksley Born had been listened to by Robert Rubin, Alan Greenspan, and Larry Summers during the Clinton era, the 2007-8 US financial meltdown might have happened sooner, but would arguably have been milder.
Rewarding whistleblowers can serve as a compliment to an idea The Epicurean Dealmaker, put on the table to attract some highly-talented people into government service. To TED:
Staff the SEC, or whatever "Super Regulator" the government decides to deputize to oversee this mess, with a bunch of highly-paid, tough-as-nails, sonofabitch investment bankers. You will have to pay them millions, just like regular bankers. (You can tie their incentive pay to improvements in the value of securities held under TARP and TALF, if you like.) Pay them well, and investment bankers won't be able to treat them like second-class citizens at the negotiating table. Pay them like bankers, and your regulators won't hesitate to read Jamie Dimon or Lloyd Blankfein the riot act, because they won't give a shit about getting a job from them later.
Trust me, these are the kind of people you will need on your team: highly educated, financially sophisticated, psychotically hard-working, experienced professionals who know or can figure out CDOs, SIVs, balance sheet leverage, and credit default derivatives just as easily as the idiots who created and trade this shit. …
If these two measures were used to compliment other reform measures, we would go a long ways toward preventing future financial catastrophes.
[Personal Disclosure: I serve on the board for a little organization (FSEEE) set up to protect whistleblowers as a part of a three-part mission. What I've learned over 20 years is that there is little protection for whistleblowers. Despite high-sounding rhetoric in several Acts of Congress, whistleblowers usually lose most everything: jobs, families, property, etc. FSEEE, PEER, and GAP (three organizations I know that attempt to protect whistleblowers) all advise prospective whistleblowers not to blow the whistle, at least not publicly. Even though all three organizations know well the value of whistleblowers, they advise against the practice because the personal price to be paid is too high. Only crazy people blow the whistle, but FSEEE, PEER, and GAP (among others) stand ready to help by getting the message out (either anonymously or with what meager protection that can be offered by "going public in a big way").]