In the wake of the financial crisis — which was driven in large part by Wall Street firms fueling the subprime lending bubble — the Federal Reserve has been looking at ways to rein in Wall Street pay packages, which incentivized bankers and traders to take excessive risk without fear of losing their gargantuan bonuses should their risk-taking backfire. Back in October the Fed began this process, and today it released its final guidelines.

In order to form these guidelines, the Fed looked at what steps banks have taken since the financial meltdown to mitigate riskiness in their pay. To put it mildly, the Fed was not impressed by what it found, announcing that it will “be following up on specific areas that were found to be deficient at many firms”:

– Many firms need better ways to identify which employees, either individually or as a group, can expose banking organizations to material risk;

– While many firms are using or are considering various methods to make incentive compensation more risk sensitive, many are not fully capturing the risks involved and are not applying such methods to enough employees;

– Many firms are using deferral arrangements to adjust for risk, but they are taking a “one-size-fits-all” approach and are not tailoring these deferral arrangements according to the type or duration of risk; and

– Many firms do not have adequate mechanisms to evaluate whether established practices are successful in balancing risk

“Many large banking organizations have already implemented some changes in their incentive compensation policies, but more work clearly needs to be done,” Federal Reserve Board Governor Daniel Tarullo said. “The Federal Reserve expects firms to make material progress this year on the matters identified as we work toward the ultimate goal of ensuring that incentive compensation programs are risk appropriate and are supported by strong corporate governance.”

While the Fed is undertaking this endeavor on its own, the conference committee reconciling the House and Senate financial reform bills also has a role to play in stamping out compensation practices that can ultimately end in systemically risky financial firms going under. The House’s version of the bill gives federal regulators the statutory ability to determine if compensation structures at financial companies (and only financial companies) are aligned with sound risk management. The Senate’s contains no such provision, so the House’s conferees should be fighting for their own chamber’s version.

As Federal Deposit Insurance Corp. Chairman Sheila Bair said, there is “an overwhelming amount of evidence that [compensation structure] is clearly a contributor to the crisis and to the losses that we are suffering.” It’s a good thing that the Fed is acting to prevent a repeat performance by Wall Street, but setting in stone some rules for the regulators to follow would be even better.

For months, the House and Senate have been unable to reconcile the differences between their respective versions of legislation reauthorizing the Federal Aviation Administration (FAA). One key difference between the bills is that the House included a provision altering a bizarre inequity in labor law that allows FedEx to enact higher bars for unionization for its drivers than other shipping companies.

Currently, FedEx is governed by the Railway Labor Act (RLA), which only allows for national unions, as opposed to the National Labor Relations Act (NLRA), which allows for unionization at the local level. FedEx CEO Fred Smith — who was George W. Bush’s fraternity brother and has said “I don’t intend to recognize any unions at Federal Express” — has been loudly denouncing the House’s proposed change, which would pull FedEx under the NLRA.

FedEx spent $21.1 million in 15 months lobbying against it, more than Gulf oil spill culprit BP and defense contractor Lockheed Martin spent in the same period. And according to Congressional Quarterly, all that effort may be paying off for FedEx, as “Senate leaders are considering a ‘test vote’ this week on the House version of the legislation,” as a way of convincing the House that its bill is untenable:

The purpose would be to show the House that an FAA bill will not become law if it includes language that would make it easier for FedEx workers to unionize. According to Senate aides and lobbyists, the gambit would be intended to convince House Transportation and Infrastructure Chairman James L. Oberstar, D-Minn., that he must drop his insistence on retaining the contentious labor language.

FedEx has successfully lobbied multiple times to remain classified as an airline (and thus under the RLA), rather than having its ground operation indentified as what it really is. The company has also threatened to disrupt its own growth and scaremongered about medical supply deliveries being delayed if Congress makes the change. Of course, FedEx’s airline pilots have already unionized, without such dire consequences, while FedEx Ground’s drivers are subject to a law that makes it all but impossible to organize and collectively bargain.

Part of the problem in the Senate is that Tennessee’s two representatives — Sens. Bob Corker (R-TN) and Lamar Alexander (R-TN) — have threatened to filibuster a bill that includes the change, going to bat for the Nashville based FedEx. But the test vote ploy seems to imply that the Senate won’t even try to circumvent such obstruction, even though the change has Senate support. “I have said very clearly that I believe FedEx workers should have the same right to organize as UPS workers do,” said Sen. John Rockefeller (D-WV). “I am continuing to work with Democratic leadership to secure a strong vote on this issue.”

For his part, Oberstar seems unimpressed with the Senate’s idea. He remains “very determined to move this bill…and I cannot see him backing off,” spokesman Jim Berard said, adding that Oberstar recently said that “the House will not be deterred by threats from the Senate.”

Late last month, Gov. Chris Christie (R-NJ) followed through on his threat to veto a millionaire’s tax passed by the state legislature. The bill would have implemented a surcharge on income above $1 million, raising $635 million to fund property tax relief for senior citizens and the disabled (among other programs).

New Jersey Democrats are planning to hold a vote to override Christie’s veto today, but lockstep opposition from the state’s Republicans is rendering success unlikely. As the Newark Star-Ledger reported, “Republican leaders have vowed not a single GOP vote will flip.”

The end result of Christie’s veto, if it is not overridden, will be to increase taxes on seniors while cutting them for the wealthy. In fact, according to the state’s nonpartisan Office of Legislative Services, “a retired couple living on a fixed income of $40,000 would see an increase of $1,320 in taxes under the governor’s plan while a family making $1.2 million would receive a tax cut of $11,598.”

As Citizens for Tax Justice added, “there is glaring hypocrisy in Christie using his anti-tax pledge to justify his veto of the millionaire’s tax”:

While Christie has no appetite for tax increases on the wealthiest New Jerseyans, he continues to support a reduction in the Earned Income Tax Credit (EITC) for hard-working low-income taxpayers (which amounts to a tax increase) and increases in fees in addition to his proposed suspension of property tax rebates for older adults and the disabled. And, his more than $1.2 billion cuts in aid to local governments and school districts will more than likely force local leaders to increase property taxes — the very taxes he claims he wants to “control”.

“New Jerseyans are going to need a thesaurus to decipher all the ways Governor Christie’s administration is trying to insist their budget plan doesn’t increase taxes on senior citizens and working-class New Jerseyans,” said state Rep. Gordon Johnson (D-Englewood). “Call them what they may, this budget would mean this simple fact — senior citizens, the middle class and the poor are about to pay significantly more while the wealthy enjoy a nice tax cut.”

New Jersey is facing a $10.7 billion budget deficit, which, at 37.4 percent of the current year’s budget, is the second-highest in the country behind Nevada. But failing to accept the millionaire tax is not the only way in which Christie is mucking up his state’s tax policy. He has also proposed a cap on property taxes which, if implemented, would lead to massive cuts in funding for education and other vital services, according to the Center on Budget and Policy Priorities.

BP has been making a major public relations push over the past few weeks to burnish its image in the wake of the massive devastation it has caused in the Gulf. The company began buying oil-related search terms to make its official site show up first in search engines, and it spent $50 million on radio, TV, and print ads featuring CEO Tony Hayward pledging to “do everything we can so this never happens again.”

Now, AdWeek reports that BP has launched an “aggressive” social media campaign that includes Twitter, Facebook, YouTube, and Flickr. The sophisticated campaign, produced with PR firm Ogilvy & Mather, “would make most social media strategists proud,” but BP seems uninterested in the social aspect of social media. On Facebook, the company only accepts comments from people who “like” BP, while comments are disabled completely on the company’s YouTube channel:

A BP spokesperson said of the outreach on social venues: “It’s an additional communication tool [along with] the regular media. They appeal to a slightly different audience. They’re more direct than other channels.” [...]

One thing BP isn’t really sharing is feedback. It turned off comments on its YouTube channel. Its Facebook page is open to comments of those that “like” BP America, and has an extensive commenting policy that warns any “ad hominem attacks” will be removed. While the page still contains criticisms, there are also some supporters.

It’s ironic that BP would disable feedback for its social media campaign, considering that the company is actively soliciting ideas from the public on how to stop the gusher in the Gulf. BP has received “thousands” of ideas, but it quickly became apparent that the company was ignoring the suggestions and that the effort was largely a PR stunt. Moreover, BP has been widely criticized for spending millions on advertising to rehabilitate its image while it should be spending that money to rehabilitate the Gulf.

This week, the conference committee reconciling the House and Senate versions of financial regulatory reform is set to deal with some of the more contentious aspects of the legislation, including the consumer protection and derivatives titles. Also on the schedule is ironing out differences regarding the Volcker rule, the proposed ban on proprietary trading with federally insured dollars.

The Senate’s version of the Volcker rule is considerably stronger (owing to the idea being formally introduced after the House had already passed its bill), and Rep. Barney Frank (D-MA), who is chairing the conference committee, has indicated that an even stronger version proposed by Sens. Carl Levin (D-MI) and Jeff Merkley (D-OR) is under serious consideration for inclusion.

But of course, the financial services industry is looking to blow holes in the rule, encouraging lawmakers to include all manner of exemptions and carve-outs:

The three main changes under consideration would be a carve-out to exclude asset management and insurance companies outright, an exemption that would allow banks to continue to invest in hedge funds and private equity firms, and a long delay that would give banks up to seven years to enact the changes. In particular, the provisions, sought by Senator Scott Brown, Republican of Massachusetts, and several other lawmakers, would benefit Boston-based money management giants like Fidelity Investments and State Street Corporation.

While the stated intention of lawmakers is not to exempt Wall Street behemoths, that would be the end-result of any carve-outs. For instance, allowing banks to continue investing in hedge funds would allow both Goldman Sachs and Morgan Stanley to hold onto their risky funds. “Once you open up the door just a crack, Wall Street shoves the door open and runs right through it,” said Frank Partnoy, a professor of law at the University of San Diego and a former trader at Morgan Stanley.

It makes sense that opponents of a strict Volcker rule would point to non-Wall Street firms like State Street to make their case. But as Raj Date of the Cambridge Winter Center for Financial Institutions Policy pointed out, State Street is the perfect example of a smaller institution that became systemically important, engaged in risky trading, and needed to be rescued by federal intervention. Thus, the firm should be subject to a proprietary trading ban. The Roosevelt Institute’s Mike Konczal explained further:

The temptation to take a boring business line, like [State Street's] custodial mechanism for record-keeping among equities and bonds, or the boring insurance lines of AIG, and stick a giant hedge fund or shadow bank on top of it is going to be too much for businesses. And when the temptation is too much for businesses, it’s going to be too much for regulators to make the call. Hence why we want to write these rules into the bill, and failing that, as close to the bill as reasonably possible.

As former Federal Reserve Chair Paul Volcker himself said, “the problem with making the exceptions with plausible cases by individual institutions is once you begin, you can never stop. And if you make enough exceptions, you no longer have a rule.”