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.