As expected, the Obama administration is readying a set of new Wall Street pay rules and guidelines and they’re likely to be unveiled next month.
Tim Geithner confirmed the timeline to Bloomberg in an interview that will air tonight:
“I don’t think we can go back to the way it was,” Geithner said in an interview on Bloomberg Television’s “Political Capital with Al Hunt,” to be aired tonight and over the weekend. “We’re going to need to see very, very substantial change.”
He said that Wall Street’s pay practices, which include big year-end bonuses, encouraged excessive risk-taking and helped precipitate the financial crisis. What’s needed is a set of broad standards that financial supervisors can use to make sure that doesn’t happen again, he said.
Will some Wall Street firms freak out and claim that talent will migrate to Europe? Probably.
But we’d also guess that these guidelines for regulators won’t really have much teeth, and we’ll be largely backward-looking. To the extent that they’d limit the kind of massive bonuses for risky trades like the ones seen during the mortgage crisis, we’d guess that a lot of this is being taken care of by the market right now.
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