Surprise supporters for pay regulation
The public comment period on proposed rules by the Federal Reserve to crack down on executive pay is over. What would the regulations do? John Dimsdale reports.
Executive with $100 bills in suit jacket pocket. (iStockPhoto)
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TEXT OF STORY
Tess Vigeland: Time's up on your chance to weigh in on the Federal Reserve's proposals to crack down on executive salaries and bonuses at big banks. Today was the deadline for public comment. Marketplace's John Dimsdale reports on some surprise supporters of the idea.
JOHN DIMSDALE: The Fed would require big banks to come up with new salary and benefit guidelines that don't give employees incentives to take extra risks. One example is a bonus sometimes offered loan officers who persuade homebuyers to take out mortgages with higher interest rates. That puts borrowers more at risk of default.
You might think banks would worry about tighter limits on compensation. Not so, says Scott Talbott with the Financial Services Roundtable.
SCOTT TALBOTT: The Fed's approach here is very balanced and is targeted toward those exact practices that caused the problem.
Talbott says banks also support the Fed's pay rules because of what they don't do: put a dollar limit on salaries, bonuses and benefits.
TALBOTT: Because that will definitely lead to brain drain or hinder the ability of financial institutions to attract and retain top talent.
Bank consultant Bert Ely can think of one more reason banks are reluctant to be critical. They don't want to look self-serving.
BERT ELY: My speculation would be that this is a tough issue for them to comment on because the commenters, the senior executives, would be expressing concern about a personal pocketbook issue as versus the regulation of their financial institution.
The Fed rules would give the central bank veto power over compensation plans at the 28 biggest banks. The rules are expected to be finalized early in January, with a February deadline for banks to come up with new pay guidelines.
In Washington, I'm John Dimsdale for Marketplace.
Comments
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From Atlanta, GA, 11/30/2009
The story fails to capture the downside. By dissuading bankers from taking risks, they will quit loaning money to startups that don't have a proven market. Instead, they'll just buy T-bills and be guaranteed a 2% yield with no risk. The right answer was to let the companies that chose poorly go bankrupt.
11/30/2009
Where are they going to go?
last i heard, europe has a cap on salaries.
These brains are the ones that created this catastrophe.
here's a new rule, no one can make more than the President of the United States.
From santa rosa, CA, 11/27/2009
why do you persist on calling these people smart? greedy, unethical, manipulative yes. who could do worse?
And where else are they going to go?
engineering, medicine, physics?
their brains have already been drained.
just call their bluffs. of course, they could go into broadcasting or politics.
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