Fed Considers Bank Pay Limits

Many of us have chafed against the lack of regulation on the financial industry, regulation needed to go along with all those billions of taxpayer dollars.  This may be a good start.

The Federal Reserve and the Treasury are preparing broad new rules that would force banks to rein in practices that made multimillionaires out of many financial executives during the housing bubble, officials said.

The rules depart from the hands-off approach that dominated bank regulation for the last three decades, but are not as strict as proposals from some European leaders and suggestions from some members of Congress angered by the financial troubles of the last year.

Fed officials would give banks wide leeway in how they structure their rewards. They would not prohibit million-dollar pay packages or address issues of fairness. Rather, the rules are intended to restrict pay plans that encourage reckless behavior by rewarding only short-term gains.

And because the rules would be applied through the confidential bank examination process, it would be hard for consumers and investors to judge how strictly the rules were being applied.

The effort is also meant to be a credible alternative to the call by some European leaders for specific limits on bonuses to financial executives, an idea opposed by the Obama administration. Officials from Europe and the Treasury are negotiating over compensation and other financial industry regulations in advance of a summit meeting next week in Pittsburgh of leaders from the Group of 20 industrialized and large emerging countries...

Inserted from <NY Times>

The Europeans took such a huge financial hit, because they believed the bogus bond ratings and jumped onboard, not realizing just how corrupt the top of the US financial pyramid had become.  A successful G-20 Summit may not be possible without specific salary caps.  However that is not what concerns me.  My problem is the lack of transparency, because we can be certain that if Republicans return to power, or if certain Democrats have their way, enforcement will falter.  We need to be sure to regulate the financial system in a way that guarantees that Wall Street millionaires cannot grow fat while trashing our economy.