Is Wall Street pay too high?

As we reach the fifth anniversary of the Dodd-Frank Act, the Obama administration's thunderous attacks on Wall Street bonuses seem a distant memory.

"I'd like to throw these guys in the brig," Vice President Joe Biden fumed when the big banks kept doling out large bonuses after the 2008 crash. "They're thinking the same old thing that got us here—greed."

Fistfull of money
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With only slightly less vitriol, President Obama blasted Wall Street pay practices for contributing to a "reckless culture," while his Treasury Secretary at the time, Timothy Geithner, declared "We have to end that era of irresponsibly high bonuses."

A new era was supposed to begin under Section 956 of the Dodd-Frank financial reform legislation. Within nine months, regulators were to ban large financial institutions from offering incentive pay that encourages "inappropriate risks" by providing "excessive compensation."

Dodd-Frank turns five on July 21 and that deadline will be 1,555 days in the past.

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What's the hold-up? With seven regulatory agencies tasked with implementing Section 956, there's endless opportunity for passing the bonus buck. And with congressional oversight committees now chaired by men who opposed Dodd-Frank in the first place, no one's hauling these foot-dragging regulators to Capitol Hill to sweat before the klieg lights.

Meanwhile, the Wall Street bonus bonanza continues. New York-based securities-industry employees hauled in a combined $28.5 billion in end-of-the-year payouts for 2014, the largest since the financial crisis.

And ongoing financial scandals are steeped in bonus perversity. Citicorp allowed the alleged ringleader of the giant Libor interest-rate rigging scheme to keep a $3.4 million bonus. That was after they accused him of trying to manipulate markets.

JPMorgan Chase gave CEO Jamie Dimon a 74 percent raise to $20 million for 2013. That was after the bank paid more than $20 billion in fines and penalties in the wake of the "London Whale" trading scandal.

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A recent University of Notre Dame survey of more than 1,200 bankers reveals the dangerous daredevilry bred by such rewards. A quarter of all banking professionals say they would break the law in order to make an extra $10 million. A full 32 percent of those with less than 10 years' experience would take the same risk.

So shouldn't we just get rid of those $10 million jackpots? As long as such outrageous sums are sitting on the table, Wall Streeters have a powerful incentive to make outrageous gambles that put us all at risk.

At a minimum, U.S. regulators should be as tough as their European Union and UK counterparts. New EU rules cap financial industry bonus pay at 100 percent of fixed compensation, or 200 percent if approved by shareholders. In other words, to have a shot at hitting a $10 million bonus, your employer would have to shell out at least $5 million in base pay. That would be especially unappealing to U.S. firms, since they have to pay corporate income taxes on all base pay above $1 million, while "performance-based" compensation is fully deductible.

Recently finalized UK rules also go further than what U.S. regulators are considering. Starting in 2016, British banks will need to stretch out bonus payments over seven years for senior managers and three to five years for lower-level employees whose actions could also blow up the firm. The goal is to discourage the kind of short-term risk-taking that led to the 2008 crash.

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Thus far, U.S. regulators have only considered a three-year deferral for top executives, leaving traders like those at the center of the Libor and London Whale scandals off the hook.

Top management at British banks will also face the prospect of having their bonuses clawed back for up to a decade after they were awarded if there's evidence of misconduct or risk management failure. The SEC has proposed only a three-year clawback period.

While the political bluster may have ebbed, the need for a crackdown on risk-inducing bonuses is even more important now that our too-big-too-fail banks are even bigger than they were before 2008.

Let's not wait until the high-flying gamblers drive us back to the brink before reining in Wall Street pay.

Commentary by Sarah Anderson who directs the Global Economy Project at the Institute for Policy Studies. Follow her on Twitter at @Anderson_IPS