U.S. Eyes Bank Pay Overhaul

[WriteDown]

Source: WSJ

WASHINGTON -- The Obama administration has begun serious talks about how it can change compensation practices across the financial-services industry, including at companies that did not receive federal bailout money, according to people familiar with the matter.

The initiative, which is in its early stages, is part of an ambitious and likely controversial effort to broadly address the way financial companies pay employees and executives, including an attempt to more closely align pay with long-term performance.

Administration and regulatory officials are looking at various options, including using the Federal Reserve's supervisory powers, the power of the Securities and Exchange Commission and moral suasion. Officials are also looking at what could be done legislatively.

Among ideas being discussed are Fed rules that would curb banks' ability to pay employees in a way that would threaten the "safety and soundness" of the bank -- such as paying loan officers for the volume of business they do, not the quality. The administration is also discussing issuing "best practices" to guide firms in structuring pay....


Read more: http://online.wsj.com/article/SB124215896684211987.html

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Some of this is nuts. You'd see a huge increase in hedge funds. I think if you took TARP and can't get it back than you have to pay the piper, but this?? "including at companies that did not receive federal bailout money, according to people familiar with the matter."

[Bankhead_ATL]

1. good..This greed thing is getting out of hand

[w4rma]

2. This is very good. It's absolutely imperitive to long term stability. (nt)

[WriteDown]

3. Not so fast..

I'm all for setting limits on banks that took the TARP funds and are not able to repay it, but if you're doing fine on your own then they can pay whatever they like. If we're going to throw around caps then we may as well just start with NBA, NFL, and MLB players.

[Cassandra]

4. Doing whatever they like...

while not taking TARP funds was how we got here. As long as we are expected to bail them out (or must because of their size) we should make sure that incentives encourage responsible behavior.

[WriteDown]

5. Exactly..

If they didn't need a bailout, then it literally is their
business.  

[Cassandra]

6. That's the opposite of what I just said.

If they are large enough to significantly damage the economy by paying employees in a way that encourages them to bankrupt the company, then they are too stupid to handle this without input from us.

[WriteDown]

7. So what other industries do you want to include in the

salary caps? There are plenty that fit your criteria.

[Cassandra]

8. Many other huge companies have been justifying...

their outsize compensation to those at the top saying it's a reward for their "genius". Clearly they're both greedy and stupid. Some general rules about how many multiples of the lowest wage should be earned by the top would make those companies more competitive. That is separate from changing the incentives for financial employees. Too many companies are being raped by their top employees; their other employees, the shareholders, their communities and the country be damned. This is unsustainable behavior for the country as a whole.

[SpartanDem]

9. They could still pay any salary

they'd like, but banning compensation practices for very risky behavior makes sense in banking sector.