The Fed and Treasury Vultures Descend on What's Left of Wall Street to... Regulate?
Better late than never but in this particular case, I don't trust either team of vultures at this point.
This is what happens when your Board is, well, the government. It is also a perfect DC parlor trick starring our friends at the Fed and Treasury. It's like they are BFFs again!
WSJ tells us what the hell is going on:
In a one-two punch at the pay culture of banks and Wall Street firms blamed for the financial crisis, the U.S. government announced plans to aggressively regulate compensation at thousands of lenders and impose steep pay cuts at seven companies that received billions in federal aid.
While the moves had been anticipated for weeks, Thursday's separate announcements by the Federal Reserve and Treasury Department represent unprecedented federal intervention in pay decisions traditionally left to boards and shareholders.
The crackdown is likely to influence how financial firms pay top executives, traders, loan officers and others whose actions could threaten the soundness of the institutions. Compensation experts said it would be hard for companies to escape the new oversight, though individuals could do so by jumping to hedge funds, private-equity funds and other financial firms beyond the reach of the new curbs.
The central bank moved to incorporate reviews of compensation into its routine regulatory process, a step that will affect large and small financial firms across the U.S. as well as American subsidiaries of non-U.S. financial companies. Some state regulators said they plan to issue similar requirements for state-regulated banks not covered by the Fed plan.
Way to get that bitchslap hand out, Fed boys, too bad you're just a tad late. Bank of America is whining that the pay czar (read: bitchslap hand) will put the bank at a disadvantage - how can it lure rats away from Goldman Sachs when eager new bankers realize their salaries will be capped at $700,000 or whatever? *cry* I'm crying for Bank of America like I cried for Ted Turner.
Many of the firms, which have together received more than $300 billion in taxpayer aid, issued conciliatory statements, but Bank of America said the ruling would put it at a disadvantage in competing with companies not under the pay czar's thumb.
"People want to work here, but they want to be paid fairly," said BofA spokesman Scott Silvestri.
WaPo gives us some more food for thought:
Consider the case of Citigroup, which last year was bailed out by the Treasury to the tune of $45 billion. For all its problems, the one bright spot at Citi has been its energy unit, Philbro, which over the past five years has earned roughly $500 million a year in pretax, pre-bonus trading profits. Under his contract, Andrew Hall, Philbro's head trader, is reportedly entitled to a bonus of roughly $100 million this year, but with taxpayers now owning roughly 40 percent of the bank, such a payout is politically unacceptable. When Feinberg indicated he would not approve the bonus and Hall threatened to walk, Citi reluctantly concluded its best option was to sell Philbro to Occidental Petroleum for the bargain price of $250 million.
To many on Wall Street, this seemed like a ridiculous outcome: Hall will still get his $100 million bonus, while self- righteous taxpayers are left with 40 percent stake in a less profitable Citigroup. But looked at another way, this may be just the sort of restructuring that the financial sector needs, and that regulators now mean to encourage.
Well that's exactly the problem, isn't it? The Fed can't even identify a giant bubble about to explode in its face, how can it possibly understand the intricacies of risk v. reward?
Rat and the feeder bar, kids, rat and the feeder bar.
Boston Fedhead Eric Rosengren even felt compelled to share a research paper he co-authored on the perfect fusion of monetary policy and oversight. Oh it's so cute to watch them jerk themselves off, isn't it?
The research was being presented by Federal Reserve Bank of Boston President Eric Rosengren Thursday. It was co-authored by Joe Peek of the University of Kentucky and Geoffrey Tootell, also of the Boston Fed. It was to be delivered to attendees at a conference held by the bank in Chatham, Mass.
“Significant synergies exist among monetary policy and bank supervision when attempting to attain both economic and financial stability,” the paper said.
“Exploiting the symbiosis among monetary policy, the supervision of financial intermediaries, and financial stability should play a central role in discussions about regulatory reform,” the paper said.
In the paper, the authors observe that the state of the financial system does indeed influence what policy makers do with short term interest rates.
During times where bank supervisors note “a large percentage” of bank assets are facing higher chances of failure, “Federal Open Market Committee policy actions are affected by such information, above and beyond its effect on the expected path of inflation and real output.”
The paper says that the Fed’s role as a bank supervisor helped it do a better job over the financial crisis.
Of course the paper says that.