Congress might give the government some say in how much Wall Street executives are paid. A former SEC accountant and a law professor give their take on the plan.
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As part of the ongoing effort by Congress to regulate financial institutions, the U.S. House took up the so-called "say-on-pay" bill that in some cases could let the government decide how much Wall Street executives are paid.
The measure would apply to the broader financial community, but is widely viewed as a response to the million-dollar bonuses paid to employees at banks that received bailout funds. Those firms already face restrictions on executive pay.
The House bill would give federal regulators the authority to ban incentive-based pay that could threaten the health of the company or the broader economy. The proposal would also give shareholders a nonbinding vote on compensation packages.
New Jersey Republican Scott Garrett said it was unwise to give regulators oversight of executive compensation, given their role in the financial crisis.
REP. SCOTT GARRETT, R-N. J.:
The other side of the aisle seems to say that that was then and this is now. But the same regulators who missed Madoff, the same regulators who missed AIG, the same regulators who missed executive compensation and other problems in the past, now all of a sudden we are going to say to them, and even expand it even further, and say we are going to give those regulators even broader authority.
But Massachusetts Democrat Barney Frank, chair of the Financial Services Committee, said the bill would ensure that those who take risks with money are held to account.
REP. BARNEY FRANK, D-Mass.:
All we are saying is that there has to be some balance to the risk-taking, that excessive risk-taking, that is — and people ask, what's excessive risk? Excessive risk is when the people who take the risk pay no penalty when it goes wrong, when they have a "heads they win, tails they break even" situation.
The debate in Washington came a day after New York Attorney General Andrew Cuomo issued a report saying some of the nation's biggest banks, many of which received billions in federal aid, paid out nearly 4,800 million-dollar-plus bonuses last year.
Citigroup, which is now one-third owned by the government, after receiving $45 billion in government aid, gave 738 employees bonuses of at least $1 million, despite losing nearly $19 billion last year.
Texas Republican Jeb Hensarling said the way to right the financial system was for the government to allow the free market to work.