FDIC Bair: Suspend some Wall St. bonuses
Wall Street firms should consider, at least temporarily, suspending eye-popping bonuses, Federal Deposit Insurance Chairman Sheila Bair said.
“It distresses me,” Bair said, referring to news that some large financial institutions are returning to pre-crisis bonus levels. “I think it is in the enlightened self-interest of these large financial organizations to, you know, suspend these outsized bonuses at least, if not permanently, (and) realign compensation to more rational levels, shall I say.”
Bair, speaking at the Reuters Washington Summit, said policing pay through regulation is very difficult and it is not the government’s role to micromanage pay.
“Some of it is just you’re going to have to rely on the industry’s own self-restraint, and unfortunately a lot of them don’t seem to be too self restrained right now,” she said.
In recent days some of the largest Wall Street firms have reported strong earnings and rebounding trading revenues — and sizable pools for bonuses.
Goldman Sachs, which repaid $10 billion in government bailout funds a few months ago, is now on track to hand out more than $20 billion in bonuses, which could make this year a record. Morgan Stanley, which also repaid $10 billion in taxpayer funds, said on Wednesday that it stashed away $5 billion in the third quarter for year-end bonuses, lifting its bonus pool to $10.9 billion.
SHAREHOLDERS BEAR RESPONSIBILITY
High Wall Street bonuses have sparked public outrage as Americans face the highest unemployment level in 26 years — 9 payday loans no fax.8 percent — and programs to aid homeowners have been slow to take hold.
Treasury Secretary Timothy Geithner told the Reuters Washington Summit on Tuesday that it is “deeply offensive” to the public that financial firms recently on the brink of failure are able to pay massive bonuses to their executives.
The administration has proposed a broad crackdown on pay, including giving shareholders more say on compensation packages, forcing firms to disclose more on their pay practices and, encouraging regulators to shut down risky compensation schemes.
Bair said shareholders bear responsibility for curbing excessive pay and tying pay to performance.
But she said the “say on pay” should possibly be limited to long-term investors.
“Some of the short-term shareholders might like the juiced up returns. They’re in and they’re out,” Bair said.
There are bills that would give the Securities and Exchange Commission authority to require publicly traded companies to give shareholders a nonbinding vote on pay for top executives. But the bills don’t differentiate between short and long-term shareholders.
“I think shareholders have a role here, but it should be the longer-term (shareholders), the people that are going to have their money in there for a while,” Bair said.
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