Thursday, October 22, 2009

Stop the Presses…Fed Looking at Banker Pay

In an unprecedented move, at least according to The Wall Street Journal, the Federal Reserve today unveiled a plan to regulate compensation practices at major financial institutions (even those beyond Feinberg’s hit parade). Sorry, am I missing something here? In once again making a few vague statements about the need to better align incentives on Wall Street, has the Fed actually done anything meaningful today? Methinks not.

And it doesn’t seem like the Fed will do anything meaningful on the matter going forward. Practically by its own admission, the Fed is likely to favor fuzzy guidelines as opposed to formulaic approaches. Don’t get me wrong, I think there’s something to be said for eschewing a one size fits all approach. Frankly, universal pay caps strike me as idiotic. At the same time, I worry that by not promulgating specific, clear cut rules, the Fed may be wasting its time.

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