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May 13, 2009 4:02 PM
Obama Wants Government Control On Bank Paychecks
Posted by Igor Kossov
In light of what he called in February a "reckless culture and a quarter-by-quarter mentality," President Obamas administration indicated that it is looking for ways to create tighter controls over pay in the banking sector. The administration is seeking ways to make employee compensation mesh with performance, something that it believes hasn't been happening.
"We had a period where compensation practices just became completely unmoored from reality, defied gravity, and they created incentives for risk-taking that overwhelmed all the basic checks and balances in the system," Treasury Secretary Tim Geithner in an interview with Associated Press.
The administration is considering working through federal agencies such as the Federal Reserve or the Securities and Exchange Commission. The Fed, for example, could prohibit banks from giving bonuses for quantity rather than quality of loans made by banking loan officers.
The rules may also come through the legislature. Representative Barney Frank, a Massachusetts Democrat, is putting together a bill that would give the government stronger authority to audit and control incentives if they are judged to threaten the economy.
The proposed new rules are still in the planning stages, but they are already proving controversial. Top bankers are opposed to the idea, which many have called either unrealistic or potentially damaging to the banking sector. Without incentives, they argued, many top employees can leave for the wild west of hedge funds. Furthermore, they said, government micromanagement isn't how banking works.
In addition, critics point out that the new rules would target not only the paychecks of top banking executives but also many employees below them. They would also apply to all banks, not just those who have taken government bailout money.
Right now, however, banks are not in the best position to bargain their case.
"As long as they are general in nature and could be enforced on a case-by-case basis, said Edward Yingling, chief executive of the American Bankers Association, according to the Wall Street Journal. What would never work is detailed regulation of compensation."
Barney Frank: TARP's comp curbs could be extended to all businesses
Would be part of broader bill limiting hedge funds, credit-raters, and mortgage securitizers; 'deeply rooted anger'
By Neil Roland
February 3, 2009 ET
Congress will consider legislation to extend some of the curbs on executive pay that now apply only to those banks receiving federal assistance, House Financial Services Committee Chairman Barney Frank said.
Theres deeply rooted anger on the part of the average American, the Massachusetts Democrat said at a Washington news conference today.
He said the compensation restrictions would apply to all financial institutions and might be extended to include all U.S. companies.
The provision will be part of a broader package that would likely give the Federal Reserve the authority to monitor systemic risk in the economy and to shut down financial institutions that face too much exposure, Mr. Frank said.
Also included in the legislation: registration requirements for hedge funds and proposals aimed at curbing conflicts of interest at credit-rating agencies such as Standard & Poors.
The bill, which the committee is working on in consultation with the Obama administration, also will require financial institutions that bundle mortgages into securities to share in potential losses. This would give banks and mortgage-specialists an incentive not to make bad loans, he said. Institutions that securitize loans improperly will incur tougher penalties.
...
If they can do this, not the stockholders deciding to sell because of salaries, it's a matter of time:
Obama Wants Government Control On Bank Paychecks | Econwatch - CBS News
May 13, 2009 4:02 PM
Obama Wants Government Control On Bank Paychecks
Posted by Igor Kossov
In light of what he called in February a "reckless culture and a quarter-by-quarter mentality," President Obamas administration indicated that it is looking for ways to create tighter controls over pay in the banking sector. The administration is seeking ways to make employee compensation mesh with performance, something that it believes hasn't been happening.
"We had a period where compensation practices just became completely unmoored from reality, defied gravity, and they created incentives for risk-taking that overwhelmed all the basic checks and balances in the system," Treasury Secretary Tim Geithner in an interview with Associated Press.
The administration is considering working through federal agencies such as the Federal Reserve or the Securities and Exchange Commission. The Fed, for example, could prohibit banks from giving bonuses for quantity rather than quality of loans made by banking loan officers.
The rules may also come through the legislature. Representative Barney Frank, a Massachusetts Democrat, is putting together a bill that would give the government stronger authority to audit and control incentives if they are judged to threaten the economy.
The proposed new rules are still in the planning stages, but they are already proving controversial. Top bankers are opposed to the idea, which many have called either unrealistic or potentially damaging to the banking sector. Without incentives, they argued, many top employees can leave for the wild west of hedge funds. Furthermore, they said, government micromanagement isn't how banking works.
In addition, critics point out that the new rules would target not only the paychecks of top banking executives but also many employees below them. They would also apply to all banks, not just those who have taken government bailout money.
Right now, however, banks are not in the best position to bargain their case.
"As long as they are general in nature and could be enforced on a case-by-case basis, said Edward Yingling, chief executive of the American Bankers Association, according to the Wall Street Journal. What would never work is detailed regulation of compensation."
yeah, amazing how some of us knew it would be Carter 2.0History repeats itself for those who do not learn the lessons of it. This Obama menstruation is mirroring Jimmy Carter's perfectly, over-reaching and drunk with absolute power. They are incapable of controlling their urge to control. And clearly either they're not students of history or, they simply blame others for what happened post-Carter.
yeah, amazing how some of us knew it would be Carter 2.0History repeats itself for those who do not learn the lessons of it. This Obama menstruation is mirroring Jimmy Carter's perfectly, over-reaching and drunk with absolute power. They are incapable of controlling their urge to control. And clearly either they're not students of history or, they simply blame others for what happened post-Carter.
fixedWAAAAAAA BUSH WHAAAAAA!!!!!!!!!!!!!!!!
Yep, the good ol "blame Booooosh" shit that Obama himself has even abandoned. Didn't you parrots and puppets get the memo?If Bush had handed off a functioning economy, this wouldn't be happening.
Total right wing slop.
If Bush had handed off a functioning economy, this wouldn't be happening.
Wonder if some folks on the upper right have wanted this type of crisis all along in order to do away with SS, medicare and caid, public education etc.?
Keep up your socialist drivel.
Total right wing slop.
If Bush had handed off a functioning economy, this wouldn't be happening.
Wonder if some folks on the upper right have wanted this type of crisis all along in order to do away with SS, medicare and caid, public education etc.?
Keep up your socialist drivel.
The economy was functioning, and in fact, still is functioning at the moment despite this power grab.
The only reason this is a "crisis" is because we live in a pampered society and have absolutely no idea what a real crisis is.
shhh, dont wake ray upTotal right wing slop.
If Bush had handed off a functioning economy, this wouldn't be happening.
Wonder if some folks on the upper right have wanted this type of crisis all along in order to do away with SS, medicare and caid, public education etc.?
Keep up your socialist drivel.
The economy was functioning, and in fact, still is functioning at the moment despite this power grab.
The only reason this is a "crisis" is because we live in a pampered society and have absolutely no idea what a real crisis is.
