"House Republicans: Steps To Rein In Wall Street Pay Are A ‘Bailout’ That Will ‘Deny Christmas Bonuses’"
One of the more overlooked portions of the financial regulatory reform effort currently underway in Congress deals with corporate governance, in an effort to rein in some of the pay structures that led Wall Street bankers to take perverse risk and force their firms to the brink of destruction. The bill passed by the House last year — and being reconciled with the Senate’s legislation in a conference committee — implements a few key reforms that House Republicans are aiming to gut.
The House bill institutionalizes “say on pay” (which guarantees shareholders a non-binding vote on their companies pay package), requires compensations committees to be independent, and gives federal bank regulators the ability to regulate pay packages at financial institutions that lead to undue and unreasonable risk.
The House Republicans on the conference committee oppose these measures, and have evidently decided that the best way to denigrate them is to associate them with a “bailout,” while falsely claiming that they will affect the Christmas bonuses of janitors and bank tellers. Watch a compilation:
Republicans have recently shown no hesitation to associate everything that they don’t like with a “bailout,” no matter how tenuous the actual connection to the financial rescues of 2008. Remember the teacher bailout?
The provisions included in the House bill are key to reining in some of the perverse incentives that drove (and may still be driving) Wall Street’s traders. Say on pay will enable shareholders to voice displeasure with their company’s executive decision, and has proven effective in reining in pay for other industries. Shareholder rejection of a Royal Dutch Shell pay package led the company to make major structural changes to its pay.
It also makes sense to give regulators the ability to regulate the riskiness of pay at financial services companies, since, like it or not, those firms are capable of harming the wider economy in way that others aren’t. As FDIC Chairman Sheila Bair has said, to suggest that regulators should do nothing “when there is such an overwhelming amount of evidence that this is clearly a contributor to the crisis and to the losses that we are suffering, I just cannot understand that.”
And to think that Bair is going to be concerned about systemic risk when it comes to the Christmas bonus given to a bank teller is, I think, quite goofy. As House Financial Services Chairman Barney Frank (D-MA) said, the House GOP’s tactic amounts to “using the unwarranted fear that we will be going after bank tellers” to “protect the bonuses of the people at Goldman Sachs.”