The Obama administration is thinking seriously about setting wage controls across all of Wall Street, including at firms that haven’t taken TARP money, says the Wall Street Journal.
The goal? Eliminate the incentives that caused executives to make dumb loans so they could take home huge bonuses.
We suppose there is some way that this could be implemented that wouldn’t be an absolutely terrible idea, but we’re scratching our heads as to what that might be.
WSJ: 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.
At the same time, House Financial Services Committee Chairman Barney Frank (D., Mass.) is working on legislation that could strengthen the government’s ability both to monitor compensation and to curb incentives that threaten a company’s viability or pose a systemic risk to the economy.
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