US Congress wants say on Wall Street pay
Congress wants to give the government a direct role in deciding how much executives on Wall Street are paid, after the biggest US banks accepted billions in taxpayer money and still managed to distribute $1 million bonuses to thousands of employees.business Updated: Jul 31, 2009 12:14 IST
Congress wants to give the government a direct role in deciding how much executives on Wall Street are paid, after the biggest U.S. banks accepted billions in taxpayer money and still managed to distribute $1 million bonuses to thousands of employees. The House was expected to pass legislation Friday by Rep. Barney Frank, chairman of the House Financial Services Committee, that would ban "incentive-based" pay that could threaten the economy or viability of the institution.
The bill, which would give regulators nine months to hash out the details, would give the government unprecedented say in how private corporations reward brokers and traders.
Democrats said excessive salaries and bonuses risk harming the broader economy.
"The problem with executive compensation is essentially, from the systemic standpoint, that it gives perverse incentives," said Frank, a Democrat.
Without penalties for bad bets, the system means "heads you win, tails you break even," he said.
Aware of the bill's populist appeal, Democratic leaders left the vote as one of their final acts before adjourning for their monthlong summer recess.
Republicans opposed the bill in committee because they said it would give the government too much control over executive pay. But the top Republican on the Financial Services Committee, Rep. Spencer Bachus, said he understands its attractiveness.
"Politically, it was very difficult for my members to stand up and fight this legislation," Bachus said after the committee endorsed the bill in a 40-28 vote along party lines. The House turns to the legislation one day after New York Attorney General Andrew Cuomo concluded in a report that the nation's biggest banks, including Bank of America Corp., Merrill Lynch & Co., JP.