In the News: And We’re Back to Capping Pay on the Street – Hooray!
Just when you thought the lunacy was behind us, team Obama is apparently toying with the notion of capping pay on Wall St, but not just for TARP banks, for the entire financial industry. Straight off the presses, “The Obama administration plans to require banks and corporations that have received two rounds of federal bailouts to submit any major executive pay changes for approval by a new federal official who will monitor compensation.” These caps, as you can see, will target those institutions that received two rounds of fed money. Regarding the financial industry as a whole, these regulations “are being described as broad principles, [and] would set standards that the government would like the entire financial industry to observe as banks and other companies compensate their highest-paid executives.” The details have not yet been presented as to whether these principles will be very strict, general guidelines, or somewhere in between – with the regulations expected to be announced as early as this week, we will find out soon enough.
Personally, I think it is a pretty silly idea. Once the government begins dictating how and how much to pay our executives, we are no longer competitive in the marketplace. It is absurd to think that people who have near zero concept of a banker’s or trader’s responsibilities will be the ones determining how much their (banker/trader) contributions and employment are worth to the company. Sure, the banks that received billions in aid should not be paying out billions in bonuses, that’s a no-brainer. But to have a Representative weigh in on how much to pay a trader who brought $250 million into the firm in 1 year, after that Representative was just reprimanded by his constituency for a low minimum wage is foolish. How can that representative adequately evaluate that trader’s merit, where would he/she find the time, and why would he/she want to – that is the job of the company’s management and its shareholders – I’m off on a nasty rant and I’ll end it there. Sorry for the run at the keyboard, but hey, it doesn’t just affect them, or me, it could also affect you, or at least will at some point if you’re reading this site and interested in the business.
