- Formulating new rules to limit Wall Street pay is back on regulators’ front burners, according to a new report from The Wall Street Journal published on Tuesday night.
- The US financial collapse and ensuing Great Recession began more than a decade ago, and that financial turmoil led to financial regulations passing the Dodd-Frank bill of 2010.
- Part of Dodd-Frank requires a series of executive compensation rules, and in September 2018 MarketWatch reported that 5 of 12 of those rules were not finalized.
- According to The Journal, regulators are "reviving a proposal that would require big banks to defer some compensation for executives and to take back more of their bonuses if losses pile up at a firm."
Formulating new rules to limit Wall Street pay is back on regulators’ front burners, according to a new report from The Wall Street Journal.
The US financial collapse and ensuing "Great Recession" began more than a decade ago, and that financial turmoil led to the 2010 financial regulations bill known as Dodd-Frank.
Part of Dodd-Frank requires a series of executive compensation rules, and in September of 2018 MarketWatch reported that five of 12 of those rules were not finalized.
The Financial Crisis Inquiry Commission, a bipartisan group tasked with examining the cause of the financial crisis, had sharp words for the compensation systems in place before the financial collapse.
"Compensation systems — designed in an environment of cheap money, intense competition, and light regulation — too often rewarded the quick deal, the short-term gain — without proper consideration of long-term consequences," according to the commission’s final report.
"Often, those systems encouraged the big bet — where the payoff on the upside could be huge and the downside limited. This was the case up and down the line — from the corporate boardroom to the mortgage broker on the street."
Wall Street pay has crept back up, following lows after the crisis. According to The Journal, regulators may dive back into writing rules that would defer compensation and institute clawbacks — the repayment of bonuses — if a firm suffers repeated losses.
In its report published on Tuesday, The Journal claims officials from the "Federal Deposit Insurance Corp., Office of the Comptroller of the Currency, and Federal Reserve" are in the early stages of rules discussions. The Federal Reserve and the OCC told The Journal that they are "committed" to finalizing a rule, and the FDIC had no comment.
In order for any new rule to be implemented, six different agencies must reach an agreement: The Securities and Exchange Commission, the Office of the Comptroller of the Currency, the Federal Reserve, the Federal Depository Insurance Corp., the National Credit Union Administration, and the Federal Housing Finance Agency.
Such measures were twice proposed during the Obama administration, but they were met with resistance from within the financial industry. The proposals were never finalized.
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