October 22nd, 2009
02:16 PM ET
12 years ago

Washington's bank pay crackdown

[cnn-photo-caption image= http://i2.cdn.turner.com/cnn/2009/images/10/22/art.money.gi.jpg caption="The Federal Reserve proposed a sweeping review of pay policies at 28 of the nation's largest banks."]
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.

Filed under: Obama administration • Wall Street
soundoff (58 Responses)
  1. JES

    When will the government start calling our society what it is Socialism.

    The government can get the best insurance, retirement, and can vote a raise when they want to.

    Only the best for our government officials that our tax dollars pay for.

    The private sector is being run by the so called Czars (Government) when they can’t even run the government efficiently.

    October 22, 2009 03:46 pm at 3:46 pm |
  2. Meredith

    Since when does the government get to dictate how much people are paid for their work? I don't disagree that many executives and traders are hugely overpaid, but the government has no business interfering.

    Perhaps next they'd like to slash the salary of the Phillies' Jimmy Rollins, or tell Angelia Jolie how much she's allowed to make from her next film. If Barney Frank shows up at my job and tells me my pay is getting cut, I'll know we're doomed.

    October 22, 2009 03:48 pm at 3:48 pm |
  3. New Age Independent

    If the government controlling business isn't socialism, please explain what this administration is doing?

    October 22, 2009 03:50 pm at 3:50 pm |
  4. Rob

    So whats next? What else is obama going to take over. Should he tell people in government housing what to do, cause its my tax money thats helping them buy a house. Should he tell them what to eat what to drive. obama=hitler! No other way around it. Get your head out of the kool aid and think about it.

    October 22, 2009 03:51 pm at 3:51 pm |
  5. sharon

    I join Rep Frank in his comment.

    but keep an eye out on them.........the off shore thing and all......secret bank accounts,etc.

    they will find away to squirrel $ somewhere for themselves.........

    October 22, 2009 03:51 pm at 3:51 pm |
  6. Jim in Michigan

    What about Fannie & Freddie

    October 22, 2009 03:53 pm at 3:53 pm |
  7. Chuck, Tennessee

    Those who applaud government intervention in private business matters need to think twice. The next industry the government hits might be yours!

    October 22, 2009 03:54 pm at 3:54 pm |
  8. Ted

    GREAT! I believe if the money is coming out of my pocket to bail out these rich stuck up billionaires to save their companies, then their salaries should be that of mine. I deserve a pay raise like millions of other Americans. I deserve to have my children attend Harvard, M.I.T. or any other Ivy league school, but I can't afford to, because I'm paying the C.E.O. of BofA 63millions to leave. Until they pay back the tax payers the money they blew, let them earn what I earn, which is drop in the ocean to what they take home.

    October 22, 2009 03:55 pm at 3:55 pm |
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