Limits on Exec Bonuses May Backfire

Package bans cash bonuses for bailed-out firms' high earners

(NEWSER) - A late addition to the stimulus package puts tougher restrictions on executive pay at bailed-out financial institutions, reports the Wall Street Journal. The rules go further than the Obama administration proposed, affect more employees, and could seriously crimp the culture of gargantuan bonuses. The big one: Bonuses can't exceed one-third of annual salaries. If banks don't play along, they have to return their bailout money. More»

Reining in pay is good politics, good economics: Krugman

(NEWSER) - Just as the recession wanes and the financial system shows signs of the health, banks are returning to their worst habits, says Paul Krugman. Not only are paychecks soaring to pre-Lehman levels, but the financial sector is using its muscle to block "even the most minimal reforms." While the Fed knows what needs to be done most—"change the industry’s incentives—which means, in particular, changing the way bankers are paid"—President Obama is showing a disturbing lack of backbone, writes the New York Times columnist. More»

(NEWSER) - Sen. Chris Dodd says that if he had known the purpose of changes to legislation he drafted for the stimulus package, he “would have flatly rejected it,” CNN reports. Dodd’s rewrite, at the behest of unnamed Treasury officials, allowed AIG and others receiving federal assistance to dole out millions in previously promised bonuses. The Connecticut Democrat says he was led to believe that the changes were “technical and innocuous,” and that he agreed “reluctantly.” More»

Matt Taibbi says bankers are still overpaid

(NEWSER) - Matt Taibbi was incredulous when he read a recent New York piece in which Wall Street denizens whined that Dodd-Frank was limiting their bonuses. "I watch what I spend," one banker lamented, "but my girlfriend likes to eat good food," which adds up fast. "Quelle horreur!" Taibbi quips in Rolling Stone , before shredding the argument. Actually, bank compensation is falling because of the European debt crisis. Bankers he knows are saying things like, "If the ECB doesn't come up with a Greek bailout package, I'm going to have to sell my children for dog food." And at some banks (like Goldman Sachs), bonuses are actually up relative to earnings. More»

Small signs of restraint as bonus season begins with record profits

(NEWSER) - Wall Street this week enters that cash free-for-all known as bonus season with quite the dilemma hanging overhead: How to distribute the billions in record-breaking profits reaped this year without incurring public wrath? Goldman Sachs expects to give out an average of $595,000, the New York Times reports, and the question for some banks is how many digits bonuses will have—six, seven, or even eight? More»