Speaking at a Reuters Washington Summit, Federal Deposit Insurance Chairman Sheila Bair said Wall Street firms should consider, at least temporarily, suspending excessive bonuses. “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.”
Recently, some of Wall Street’s largest firms have experienced strong earnings and rebounding trade revenues–including substantial bonuses. “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.
Bair emphasized that shareholders should influence the curb of excessive pay practices, however, she added that such “say on pay” influence 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.