NEW YORK (CNNMoney.com) - Washington launched its biggest offensive yet against runaway Wall Street pay practices Thursday, taking aim at everyone from senior executives to high-flying traders of complex securities.
The Federal Reserve proposed a sweeping review of pay policies at 28 of the nation's largest banks as part of an effort to make sure employees are not tempted to make the kinds of bets that could put their company at risk of going under.
"The Federal Reserve is working to ensure that compensation packages appropriately tie rewards to longer-term performance and do not create undue risk for the firm or the financial system," Fed Chairman Ben Bernanke said in a statement.
Separately, the Obama administration's "pay czar," Kenneth Feinberg, is expected to unveil sweeping pay cuts for 175 top executives at the seven biggest bailed-out companies.
Feinberg is expected to demand that Citigroup, AIG, Bank of America, Chrysler, General Motors, GMAC and Chrysler Financial slash compensation packages for its top 25 most highly-compensated employees 50%, on average, a senior administration official told CNN.
The lion's share of those cuts are expected to come from annual salaries, which are expected to fall 90%, on average, the official said.
Thursday's announcements, which first started to surface just a day earlier, perhaps represent the greatest advance against Wall Street pay practices.
Certain shareholder groups and other social activists have long campaigned for banks and other financial firms to do a better job aligning executive pay with a company's performance, but those efforts have made little headway.
Some on Capitol Hill cheered the news.
"Hooray!" said Rep. Barney Frank, D-Mass., who chairs the powerful House Financial Service Committee, speaking about the White House plan to crack down on pay to bailout companies.
"I think we got from Ken Feinberg exactly what we were hoping to get," he said.
–CNNMoney.com senior writer Jennifer Liberto contributed to this report.
From CNN Politics
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I don't want the government in the business of telling companies how much they can pay.....BUT.... I agree that these banks and car companies that took Billions of Bailout need to be more reasonable. No more than $1 million in total compensation for the next 4 years for any employee in any company that got bailout money either directly or indirectly (e.g. through AIG). I also think that Goldman Sachs should be on the list of companies that should limit compensation.
Here we go the strong arm of the government. soon they will want to regulate everyone's pay.
We should all regulate the governments pay for there piss poor job performance.
Obama is a true Socialist
@CNN: One thing that is not clear from reporting on any of the media outlets is how long is the federal government going to be the managing partner of the firms that were bailed out. Is that a permanent ownership position for the government?
While I am sure the wingnuts will express outrage, remember, these financial institutions would not be in existence if not for the American taxpayer. This should have been included in the original package when the Bush administration gave out the $700 billion to the banks with no strings attached.
Good and Good-er. It has been a long time coming.
Now maybe we the people can get a decent interest on our bank accounts( checking,savings,Cd's).
What we need is a national non-profit bank. Just like we need a single payer non-profit universal health care system.
Put the money into the bank for the people and into health care not into the hands of a select few.
They brought this on themselves... all they had to do was show just a little restraint... less greed would have been good for the whole country.
The Republicans will have something negative to say about his, too. Take that to the bank.
I'm not a big fan of Obama's, but I support him 100% with this pay cut!!! These companies received so much taxpayer money and then they turned around and payed top CEOs TENS of MILLIONS a year! For what?! They certainly didn't earn it. Go get them Obama!
I wonder if the pay czar will allow the president to accept the money that comes along with the Nobel Prize? He is a government employee and should not be allowed to accept gifts or bonuses like that. We'll see if he sets an example or continues to follow the do as I say, not as I do model.
How about some sweeping pay cuts for Congress while your at it.
As far as I'm concerned, any person at one of those banks who was there when this whole debacle commenced should forfeit their pay entirely. Whatever they were to be paid should offset what we the taxpayers have given them as a bailout.
Scary. The govt. needs to stay out of telling business what to do. Isn't that how we got into this mortgage mess in the first place?
And what of pay at the Capitol? Wasn't a pay INCREASE just voted for and passed?
Way to go ! It was about time !!!!!
American capitalism is dead. It was killed by the Reagan, Bush, Clinton, and Bush administrations. Under their oversight, American manufacturing ceased to exist, American jobs were exported to China, India, and South America. Americans are losing their jobs, their benefits, and their homes. The middle class is struggling to survive.
In a pinch, America could not feed itself or fuel itself. We have become dependent on long and fragile supply chains, many of which are controlled by nations that hate America and would destroy it any time it becomes profitable for them to do so. For now, China, Iran, Syria, Iraq, and Venezuela are content to harvest American dollars year after year – as our debt grows and our wages shrink.
American capitalism has been replaced by Corporatism. Giant global corporations who have no allegiance to America and no respect for our laws or our well-being provide us with the necessities of life for the highest possible price. They work Americans long hours for shrinking wages, laying us off and increasing the workload of the rest.
And Republican voters are to blame for all of it. They put those rascals in office year after year. For shame.
I think insurance executives get paid too much myself, but the pay of the execs is a tiny proportion of overall cost of healthcare. Even if these guys got paid nothing insurance rates wouldn't change much if at all. The other part of the legislation makes sense though, trying to dissencentivize or at least not incentivize risky behavior.
After they chase qualified CEOs out of the market, they will then have Barney & Co. step in and say the since these companies can't find qualified talant to run them, we will appoint the CEOs. Welcome to Fannie and Freddie redux.
At least the overpaid employees create somthing cars etc. What about the greedy trial lawyer ambulance chasers, all they create is a tort tax on every good or service you purchase. Let's cap their salaries and use the money to help pay off the national.
About time,
I hope Americans now recognize why President Obama put Czar in place in order to stop these thieves from continuing to steal from tax payers.
Too little too late....
How about investigating our Senators and Representatives and the lobbyist and special interest connections and "Campaign Contributions", this is like the fox watching the hen house. Just more smoke and mirrors from an inept Administration and a broken House and Senate.
IRS investigating 100,000 first time home buyers with regard to the $8,000 tax credit for fraud, do the math....
Cash for Clunkers..... do the math....
Not enough H1N1 vaccines, don't worry Uncle Fed will take care of your sick kid for FREE.
12% unemployment in America
20% unemployment in California
Question of the Day:
Who is gonna give you your entitlements when there is no longer a working class to support them?
That Obama sure can shoot a mean hoop!
Yes, please do it! And while you are at it also stop bailing them out and give your self a pay cut as well!!
How to make sure you company fails? Offer the CEO's $200,000 a year for their salary and see how quickly they get a job with your competition. Don’t worry though I am sure you can find some great talent to run a multi-billion corporation for the same pay as someone running a small business with a lot less stress.
Don’t worry about making them loan out money (responsibly this time) to get the economy rolling again. You just concentrate on the structure of the corporation. I am sure by the time you are done you will have a highly profitable bureaucracy with little overhead (he he giggle).
this has more satisfaction than a 300 point surge in the dow
If we go on the way we have, the fault is our greed [and] if we are not willing [to change], we will disappear from the face of the globe, to be replaced by the insect.”
Jacques Cousteau quotes (French Explorer, 1910-1997)
I like the fact that President Obama is cracking down on Wall Street. They have been acting like spoiled rotten, greedy children. Like my mom said, "If you choose to act like a child, you will be treated as such." Wall Street, until you grow up, mature, and renounce the ways you have been treating us, this will be only the beggining. That is not a threat, that is a promise. This is from a Main Street teenager who is in college. Thank you President Obama for trying your best for us. Like you said to the fourth grader, Terrance, keep on going even if someone is treating you badly. Wall Street, that fourth grader has more common sense than you. He really seems like a kid with a very bright future.