Frank wants tougher rules for Wall Street pay
WASHINGTON — A senior House Democrat wants to toughen President Barack Obama’s new restrictions on Wall Street pay by banning salaries and bonuses that encourage what the government considers “inappropriate risk.”
The proposal by Rep. Barney Frank, D-Mass., which was under consideration Tuesday by the House Financial Services Committee, would give the government unprecedented power in how financial executives are rewarded.
Obama has shied away from such direct intervention, even as administration officials argued that excessive compensation in the private sector contributed to the financial crisis.
“If the risk pays off, you make money,” Frank said at a National Press Club luncheon Monday. “And if the risk doesn’t, you suffer no penalties. Heads you win, tails you break even. It’s like selling lottery tickets that only cost you money if they pay off.”
Earlier this month, the Obama administration sent Congress legislation that would give shareholders a nonbinding vote on executives’ pay packages.
Obama’s plan also seeks to diminish management’s influence on pay decisions by requiring that members of compensation committees be free of financial relationships with the company and its executives.
At the same time, the administration gave Kenneth Feinberg, a lawyer who oversaw payments to families of victims of the Sept. 11, 2001, terrorist attacks, the power to reject excessive pay plans at companies that have received large federal bailouts.
Frank has embraced the administration’s legislative proposal but added a provision that would require financial companies to disclose to federal regulators the details of any “incentive-based” compensation.
Frank’s bill also includes an outright ban on compensation that encourages inappropriate risk that could threaten the economy or the “safety and soundness” of the institution.
If approved in committee, the House planned to vote on the measure Friday.
In addition to curbing excessive pay on Wall Street, Obama wants to extend regulation to cover new corners of the financial system, including derivatives and hedge funds. He also wants to give more power to the Federal Reserve to oversee large institutions deemed “too big to fail,” as well as create a government agency dedicated to monitoring popular consumer products like credit cards and mortgages.
Frank said he expects the House to finish the broader reform package by September or October. The Senate would follow and send a bill to the president by the end of the year, he said.
(This version CORRECTS to show that the committee plans to finish broader reform package, not pay restrictions.)
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