Washington's Bank Pay Crackdown

[amoeba15]

NEW YORK (CNNMoney.com) -- Washington launched its biggest offensive yet against runaway Wall Street pay practices Thursday, taking aim at everyone from senior executives to high-flying traders of complex securities.

The Federal Reserve proposed a sweeping review of pay policies at 28 of the nation's largest banks as part of an effort to make sure employees are not tempted to make the kinds of bets that could put their company at risk of going under.

"The Federal Reserve is working to ensure that compensation packages appropriately tie rewards to longer-term performance and do not create undue risk for the firm or the financial system," Fed Chairman Ben Bernanke said in a statement.

The nation's central bank said it also planned to review compensation practices at the thousands of regional lenders that make up the bulk of the U.S. banking industry as part of its standard review process.

Separately, the Obama administration's "pay czar," Kenneth Feinberg, is expected to unveil sweeping pay cuts for 175 top executives at the seven biggest bailed-out companies.

Feinberg is expected to demand that Citigroup (C, Fortune 500), AIG (AIG, Fortune 500), Bank of America (BAC, Fortune 500), Chrysler, General Motors, GMAC and Chrysler Financial slash compensation packages for its top 25 most highly-compensated employees 50%, on average, a senior administration official told CNN.

The lion's share of those cuts are expected to come from annual salaries, which are expected to fall 90%, on average, the official said.

Thursday's activity, which first started to surface just a day earlier, perhaps represent the most sweeping push against Wall Street pay practices.

Certain shareholder groups and other social activists have long campaigned for banks and other financial firms to do more to align executive pay with a company's performance, but those efforts have made little headway.

money.cnn.com/2009/10/22/news/companies/compensation_white_house/index.htm?postversion=2009102213

[TMWight]

Good, they need to be taught a lesson. I'm happy that the government bailed these jackasses out and actually regulate them.

[TW]

I've never been able to figure out why a bank would consider a person a good leader, give them over $100 million in bonuses, all while the great "leader" was representing them when they hit the wall.

Obviously there has to be some degree of accountability when it comes to who's driving the car when you run over the neighbor's hedge.

[packerconvert]

Any company that received TARP money is beholden to us, the taxpayer for bailing them out.

The controls imposed are in exchange for the viability to continue doing business.

[TW]

I think the biggest issue was that a top executive would get $50 million in pay, and out fit would lose $45 million. To me, that says that the paycheck they got was a major reason they lost the money.

I keep thinking about the American Airline execs who used the "bottom line" that they made profits because they got millions of dollars from the government, to pay themselves a bonus for a "good job."

That stink permeates everything that these people do now. The feeling is that they can't be trusted, and for what appears to be logical reasoning.

[TW]

Here's a game the banks are playing to get even more federal money, and in the process, they'll create an even bigger housing problem.

Of course we have to thank all bureaucrats for letting it happen over and over.

news.yahoo.com/s/nm/20091025/us_nm/us_usa_housing_detroit

[packerconvert]

Oct 25, 2009 15:35:43 GMT -5 TW said:

I think the biggest issue was that a top executive would get $50 million in pay, and out fit would lose $45 million. To me, that says that the paycheck they got was a major reason they lost the money.

I keep thinking about the American Airline execs who used the "bottom line" that they made profits because they got millions of dollars from the government, to pay themselves a bonus for a "good job."

That stink permeates everything that these people do now. The feeling is that they can't be trusted, and for what appears to be logical reasoning.

No different than employees showing up for work and then expecting a bonus when they actually work.

[TW]

True, and those bonuses shouldn't be paid either.

Edit:

I rushed that response. Knee jerk reaction. I don't think we're talking about the same thing. We're talking about the decision-makers who make poor judgment calls being rewarded for making those bad calls.

The other... which you referred to... should be dealt with as well, but I don't consider it quite equal, because we're talking at potentially vast differences in accountability and responsibility.