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. Dave

    control the money and the cars and health care. Next year comes a national airline and the attempted control of the energy industry (cap & trade)

    but it isn't socialism

    October 22, 2009 02:52 pm at 2:52 pm |
  2. mark

    This is ridiculous, capping pay worked real well in the USSR comrade obama...say goodbye to your TARP dollars...

    October 22, 2009 02:53 pm at 2:53 pm |
  3. vpdavish

    It is high time to control the party on wall street and banks. Practice of capitalism without personal responsibility is destructive to business and the nation. I am glad the administration is taking action.

    October 22, 2009 02:54 pm at 2:54 pm |
  4. Pat

    The government should crackdown on campaign financing, lobbyists, amount of time spent trying to get re-elected. Let them clean up their own mess first and control their own money before messing with everyone elses.

    October 22, 2009 02:54 pm at 2:54 pm |
  5. JT the concerned College Freshman from MO

    Furthermore, my generation is not going to tolerate greed, period. We young people are flat out tired of those greedy people. Wall Street take that as a warning from the generation about to enter the real world, where we can and will make a huge difference. Again, we will not tolerate any greed what so ever.

    October 22, 2009 02:55 pm at 2:55 pm |
  6. Obama 2.0

    Everyone else is dealing with Furlows and lay-offs and it's their faults anyway.

    October 22, 2009 02:56 pm at 2:56 pm |
  7. Annie, Atlanta

    This is good, since these guys are rewarding themselves for a worldwide economic meltdown, on our dime. Tacky, but what can I say. Personally, after they pay back the money I don't care what they do. I just want to see safeguards in place so that it doesn't happen again. Until then they will continue to think they can keep coming to our till to reward themselves for bad behavior. So it needs to be curbed.

    October 22, 2009 02:56 pm at 2:56 pm |
  8. The Lonely Libertarian of Liverpool NY

    Hey folks! Does this sound like the practices of a free Country? The Federal Reserve Bank a private bank (not part of our elected government) is going to tell other private companies many that are publicly owned by share holders what they can pay their employees.
    If we had allowed these businesses to fail and not bailed them out, they would have reaped that what they sowed. And many, many new companies with honest businesses practices would have replaced them. None of whom would be too big to fail.
    Read Dr. Ron Paul’s new book “End the FED” today.

    October 22, 2009 03:02 pm at 3:02 pm |
  9. EG Berlin

    How stupid!! When do the multi-millions a year sports figures get their salaries cut? Salesmen's shares? Annual returns on investments that are much greater than many US workers?

    October 22, 2009 03:06 pm at 3:06 pm |
  10. Deb

    Good, make the tough decisions. Wall street executive don't deserve a salary. They should work for free. They created this mess.

    October 22, 2009 03:07 pm at 3:07 pm |
  11. Ignorance is bliss

    I think those executives should all be paid 30 billion dollars a year because the private sector is ran be pure geniouses, much smarter than Albert Einstein

    October 22, 2009 03:08 pm at 3:08 pm |
  12. Melissa

    Its about time. Its time bonus's are based on performance, not based on you just plain working there. And there is no reason why any CEO ever needs to make $40 000 000 a year plus bonus, no matter who you are. Being the owner is another matter altogether, but no CEO is worth that much money.

    October 22, 2009 03:11 pm at 3:11 pm |
  13. Victim of Democratic Greed

    Gee don't you think they would have thought of this BEFORE handing out all our Tax payer bailout money?

    October 22, 2009 03:11 pm at 3:11 pm |
  14. Danny

    It's about time someone tried to insert some sanity into the pay levels of these executives who were running the financial companies when it all came crashing down. How can anyone justify rewarding these clowns with multi-million dollar salaries & bonuses when they are responsible for the worst economic downturn in decades? What's wrong with tying their pay to their performance? That's what the other 99% of Americans go through. If they're as good as they think they are then there should no problem, right?

    October 22, 2009 03:14 pm at 3:14 pm |
  15. File under "Sarcasm"

    Preident Obama's buddy Hugo Chavez will be proud but sad that he didn't think of it first, wage controls without "nationalization".

    Here's a thought, the executives should join one of the unions protesting the planned tax on high end insurance plans. I'd love to see how the great campaigner would handle that conflict.

    October 22, 2009 03:14 pm at 3:14 pm |
  16. Idiot_Pelosi

    I could see a reasonable pay cut, but his is ridiculous. Any talented person will be LEAVING to find a job at one of the other companies that did not receive a bail out (or has paid it back).

    We'll be left with less talented people (such as OBOZO) running these companies.

    Way to go Comrade.

    October 22, 2009 03:15 pm at 3:15 pm |
  17. Reagan was wrong

    I can already see the GOPers bringing out the usual "government takeover" boogie man and, as usual, it's best to ignore the ugly, monolithic mess that the GOP has become.

    The problem with the GOP base is that once they believe something, they will believe it for the rest of their lives. So, while Reagan's argument that "government is the problem" may have had some validity 30 years ago, in the minds of the GOP base it has morphed into "government is ALWAYS the problem".

    We have now seen that financial institutions are incapable of regulating themselves. In this case, government is NOT the problem.

    October 22, 2009 03:18 pm at 3:18 pm |
  18. Tom

    No one is up in arms about this? Government telling business what thier pay scale should be? This is blatant socialism.
    And it's another great example of the non-thinking, non-planning by this administration and the sitting congress. If they wanted restrictions on how the money could be used, they should have made those restrictions at the time the bailouts were given.
    Instead they just blithely "gave" the money away.
    Well, once it's given, it's given. It belongs to the companies now, and the government no longer has any say. That is, if we want to live up to the idea of a non-socialist country.
    Exaclty who is this "pay czar" and what is he doing in the government?
    Get rid of all these unregulated and unelected "czars." And while we're at it, let's replace Obama and the entire congress. Couldn't be any worse than it is now.

    October 22, 2009 03:28 pm at 3:28 pm |
  19. gt

    the amount of money these hedge fund excutive make ,,, is a thousand times worst than the mod ever thought about,ding ,,but , dont stop there.. the insurance c e o salaries and bonus are insane ...bankers ,,, insurance excutives,, lawyers who rip these class action law suits ,, there are in hock with the devil....

    October 22, 2009 03:30 pm at 3:30 pm |
  20. phoenix86

    The difference between Wall Street and Washington is that no one is guaranteed employment on Wall Street, so they have to hire the best and pay the best.

    Washington just fills quotas. Wall Street provides capital for all of America.

    October 22, 2009 03:31 pm at 3:31 pm |
  21. johnnie w

    GOOD, now thats NEWS to print CNN, you need to crack down on that BIRTHER the one and only Lou Dobbs, you need a CZAR to CUT him off the AIR period. Print that CNN?

    October 22, 2009 03:31 pm at 3:31 pm |
  22. T Mckinley

    "Free market capitalism" should NEVER be used as an excuse to justify greed. How many millions of dollars does an executive need to make to be able to live comfortably?

    October 22, 2009 03:37 pm at 3:37 pm |
  23. single mom

    Instead of wasting money paying more bureaucrats to audit companies who are going to play shell games with the money anyway, why don't we just not give the companies any more of our taxpayer money?

    And Frank needs to be told to hush. If he and the other Democrats had listened to Bush and McCain in 2006, then the meltdown last year would have been headed off. But Frank, Dodd, Rangel and others, including Republicans, were getting deals to look the other way.

    3 Nov, 2010 – let the countdown begin!

    October 22, 2009 03:40 pm at 3:40 pm |
  24. Wake Up

    Anyone now questioning that Obama is a socialist? Government should not control the private sector. PERIOD. Bad precedent!!!

    October 22, 2009 03:41 pm at 3:41 pm |
  25. Ray E.

    If someone works hard are they not allowed to enjoy the fruits of their labor? Is this the re-invention of Naxi Germany or the USSR again?

    Why try to better yourself if the government takes most of it? It is disgusting when the talking heads blame wall street for the bank failures and the housing meltdown. What will be next?

    October 22, 2009 03:42 pm at 3:42 pm |
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