The Federal Reserve and Treasury are preparing new rules that would require banks to limit compensation to its financial executives, reports the New York Times. The new rules, which would be more stringent than past limits, are still considerably more lax than proposals from some European leaders and suggestions from some members of Congress made last year. The Feds would not prohibit million-dollar pay packages or address issues of fairness but would restrict pay plans that encourage irresponsible behavior for risky moves. “The simple proposition should be that you don’t want people being paid for taking too much risk, and you want to make sure that their compensation is tied to long-term performance,” said Timothy F. Geithner, the Treasury secretary, in an interview by telephone to NYTimes. Some critics are skeptical as the Fed’s past history shows that they were not sufficiently diligent leading up to the financial crisis. Republicans also chide the Obama administration on the government gaining too much power during the economic crisis, becoming too “autocratic in telling banks what to do.”
Fed Preparing New Bank Pay Rules
The Fed and Treasury seek to rein in executive pay in the banking system.
September 21, 2009