Give Your Comments Here on FDIC Proposal For Executive Compensation

Upon occasion, I’ve asked readers to contact their Senators or Representatives about pending legislation. Many of you have taken action, even though that takes a bit of effort (actually composing and making the call or e-mail). Some readers have also commented, cynically, “Why bother, Congress will do what it corporate constituents want to happen.”

Today’s political action item is both easier for readers and more directly tied to outcomes.

The FDIC is seeking public comment on a proposal to link bank deposit insurance premiums to the degree of risk-taking encouraged by the bank’s executive compensation program. Note that this measure does not require Congressional approval. However, the FDIC board is split, which makes the public’s input a much more important input than on issues where the board is united. This summary of the state of play via CBS News:

A divided board of the Federal Deposit Insurance Corp. voted to make public a preliminary proposal for using executive compensation as a factor in assessing the fees that banks must pay for the deposit insurance fund. The plan could involve both rewards and penalties for banks.

“This is something we cannot ignore,” FDIC Chairman Sheila Bair said. But two heads of Treasury Department agencies, who also sit on the five-member board, voted against floating the proposal.

John Dugan, director of the Office of the Comptroller of the Currency, and John Bowman, acting director of the Office of Thrift Supervision, said it would be premature because Congress and the Federal Reserve were addressing the bank compensation issue.

The FDIC is seeking public comment on the plan for 30 days. If there is a final rule, it isn’t expected to be adopted until late in the year…

“We’re really just asking questions at this point,” Bair said. She stressed that the regulators weren’t seeking to dictate compensation levels for banks but were exploring whether certain pay practices encourage banks to take excessive risk.

The FDIC proposal seeks input on a possible model for banks’ compensation policies that would include payment in restricted company stock for a large portion of pay for employees whose work is deemed potentially risky. In addition, significant awards of company stock only would become vested over a multi-year period.

The plan could involve both rewards and penalties for banks. A possible reward: Banks that are able to “claw back” compensation from executives under pay contracts could get reductions in their insurance premiums. Penalties, on the other hand, would call for increased fees for banks with pay deals that involve more risk.

If the plan were adopted, banks’ compensation structures would be added to the other risk factors now taken into account by the FDIC in assessing fees, including diminished reserves against risk and reliance on higher-risk so-called brokered deposits. The idea is for institutions deemed to be higher-risk to pay bigger insurance fees.

You can read the text of this Advanced Notice of Proposed Rulemaking here.

I am in favor of this idea, and will send a message in support of it. I would like to attach reader comments (both on your views of the general merits of the idea, and any particular suggestions you have on the particular issues raised in the ANPR).

To be clear on the ground rules: any bona fide comments on the proposal will be sent to the FDIC. Comments that are not about the proposal will not be included (not that you should restrict yourselves to the proposal, philosophical discussions are a staple at NC, but I just want to be clear about what will and won’t be sent to the FDIC). Anything disrespectful will not be included either. I will clean up typos and minor errors, but will not change substance. Please indicate where you live (city and state).

Some Congressmen have stepped forward to voice support:

Sheila Bair
Federal Deposit Insurance Corporation
550 Seventeenth Street, NW, Room 6076
Washington, DC 20429

Dear Chairman Bair,

We write to applaud you for taking an important step towards holding bank executives accountable for risky, destructive behavior. If your proposal to tie deposit insurance premiums to executive compensation structures is enacted, banks will be charged more for deposit insurance if their executives gamble with the firm’s money. Our constituents feel that executives on Wall Street have looted their banks, and then have billed taxpayers “for services rendered.” They have lost confidence in other regulators. Thanks to you, finally it seems as though there’s a cop on the beat on Wall Street.

A bank executive who seeks to maximize short-term gain at the expense of solvency is not just putting his bank’s shareholders and creditors at risk, but also the US taxpayer and the FDIC deposit insurance fund. By seeking to foreclose that possibility, the FDIC continues to earn the kind of public trust that is so lacking throughout the regulatory community.

On the specific question of whether pay packages contribute to risk, it should by now be quite obvious that a financial institution that pays its executives with a ‘heads I win, tails you lose’ pay package is likely to destroy itself. We saw this during the Savings and Loan crisis, during the bailout of Long Term Capital Management, and during the most recent financial crisis. Paul Volcker, Bill Black, Simon Johnson, and other economists and observers have made this point.

It’s also clear, as well, what happens when executives have well-designed pay packages. When “bulge bracket” investment houses were private partnerships, executives were leery of putting their own capital on the line in risky schemes. This created a natural barrier against reckless and risky behavior. When Wall Street firms began going public, and offloading risk onto shareholders, executive behavior suffered. Now that these firms can gamble with money from the Federal Reserve and from taxpayers, executive behavior is even worse.

While it would be nice to presume that large banks are chastened by their recent need to beg the public for capital, it is clear that financial services executives “just don’t get it”. Lloyd Blankfein of Goldman Sachs recently claimed that his firm is ‘doing the lord’s work’. Harvard Business School Professor and Goldman Board member Bill George just compared bankers who lose gargantuan amounts of money to professional athletes and movie stars. The large bank lobby has worked furiously to water down reform; the Securities Industry and Financial Markets Association is resisting a mild fee on large banks, and aggressively sought loopholes in derivatives legislation.

Unlike those at community banks, executives at large Wall Street banks have consistently displayed cavalier attitudes towards risk. Despite large bonuses on Wall Street and the gnashing of teeth among regulators, very little seems to have changed as of yet. We applaud Chairwoman Bair and the FDIC for breaking this damaging cycle of passivity, and taking the first real steps to rein in dangerous executive compensation structures. According to Section 7 of the Federal Deposit Insurance Act, the FDIC clearly has the authority to use any factor it “determines relevant” when assessing the probability that the Deposit fund will incur a loss with respect to any specific institution. Compensation structures are certainly relevant in terms of understanding the risks that these banks are incurring.

We disagree with Comptroller John Dugan’s dissenting statement on this. Comptroller Dugan’s argument is that higher insurance deposit costs are unnecessary merely because Congress is debating granting authority to rein in executive pay, and that the Federal Reserve is working on the problem. He also argues that there is no evidence that executive compensation structures contribute to losses in the Deposit Insurance Fund. These arguments seem meritless. In light of recent history, trusting the Fed to rein in banker pay is like asking an arsonist to guard the armory. His argument that there is “no evidence” compensation structures contribute to institutional risk might have credibility if his own agency had shown any interest at all in stemming the ‘epidemic of mortgage fraud’ that the FBI noted as early as 2004. As is, his arguments simply justify the continued looting of large banks by their executives.

Our constituents are demanding action, not idle chatter. In Congress, we are debating what steps to take. In the meantime, we appreciate outstanding judgment that Chairwoman Bair, Vice Chairman Martin Gruenberg, and Thomas Curry have shown in carrying out their duty to the public.


Alan Grayson
Michael Capuano
John Conyers
Lloyd Doggett
Keith Ellison
Bob Filner
Luis Gutierrez
Marcy Kaptur
William Lacy Clay
Eric Massa
Brad Sherman
Jackie Speier
Pete Stark

Yves here. I hope you will take a few minutes (or more than a few, if this topic is of particular interest to you) to add your views. Thanks for your efforts and input.

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  1. Brandon

    Our current President of the United States when talking about Mr. Blankfein’s bonus yesterday:

    “there are some baseball players who are making more than that and don’t get to the World Series either, so I’m shocked by that as well.”


  2. i on the ball patriot

    Awesome! Its a double give up your power opportunity!

    You get to validate and legitimize with your attention the crooked government and the crooked banking industry that bought it all at the same time, and, as a bonus, you do an extreme disservice to those who do boycott that corruption on principle.

    When you play in a known crooked game you deserve to lose.

    Yuk! And disgusted!

    Deception is the strongest political force on the planet.

  3. sotruth181

    Excellent Sheila. Go after the Hard. Make damn sure that they cannot hide their looted stash in Bermuda, Caymans, Isle of Mann. Nor get it in deferred comp such as obscene pension funds which are not taxable until vesting after they retire. Because if there is one guarantee about these b..s, they will do anything to continue looting. I don’t want words anymore. Just action.

    1. surferdude

      before the fdic chairman goes after reforming the pay system of the industry why does she not reform the pay system of her agency to prevent regulatory capture. the senior executives and managers of the fdic (and other agencies as well) have not been held accountable for their regulatory malfeasance. look at the losses suffered by the fdic insurance fund. the fdic atlanta region has seen more than 50 failures at a cost exceeding $16 billion, yet the executive that presided over the region when the assets were put on the balance sheet retired with a full package. sheila should reform the fdic pay package of fdic executives and senior managers to clawback when they perform this poorly before forcing the industry to do it. be proactive sheila and set an example at your own agency first.

  4. Vicky Else

    As a small business person, I am painfully aware of the devastation wreaked by reckless, greedy, and ultimately stupid banking practices. Any regulation that creates a disincentive for banks to suck money out of the real economy will support the success of those of us who actually strive to create wealth for our communities. Although I would like to see more comprehensive reform,I strongly support the FDIC proposal to link bank insurance premiums to the risk-taking encouraged by executive compensation.

  5. charcad

    Having spent some decades serving the cause of limited Constitutional government, let the resident fascist put in a plug for it now. The two dissenters didn’t say they opposed bankster pay caps. What they said was:

    “John Dugan, director of the Office of the Comptroller of the Currency, and John Bowman, acting director of the Office of Thrift Supervision, said it would be premature because Congress and the Federal Reserve were addressing the bank compensation issue.

    In my opinion a very becoming attitude for servants of Constitutional and representative government.

    The German Constitutional Court also had it right when it observed the EU’s institutions all lack democratic legitimacy and that final sovereignty still resides in the national parliaments and electorates. An attitude often opposed by the paid shills of the self-appointed and accountability resistant Brussels bureaucracy.

    otoh Lisa Jackson of the EPA is a classic example of the wrong sort of bureaucrat. This is one who is ever ready to substitute her administrative diktat the moment “representative government” fails to do what she thinks it should do. CO2 “regulation” for instance.

    Now it could easily be the case that dictatorship is the wave of the near future. The hallmark of the continuing EU project is avoidance of popular referendums at all costs.
    And there is no shortage of North American residents who prefer E-Z money trading with a dictatorship in Beijing whose real character they chose to ignore.

    But if we are down to unelected elites I have a different set in mind from the one now commuting from lower Manhattan
    to offices on Pennsylvania Avenue. To put it in technical terms, that group has fucked it up seven ways from Sunday.

    The best way to cap the pay of financial executives is to cap the size of their institutions.

    1. Kevin de Bruxelles


      I applaud you for your deeply held democratic principles. Of course, given the tendency of many to call for policy makers to be more democratic than the Athenians when they oppose something, while cheerleading efforts to ignore Congress when they support an endeavour, I would just like to make sure your democratic aspirations are real and not just a protective cloak to hide your partisan desires.

      For example, I am sure you were even more outraged when that undemocratically elected bureaucrat George W. Bush launched wars that were not declared by congress. And when that unelected wrong sort of bureaucrat Donald Rumsfeld made decisions on troop levels instead of deferring those decisions to a democratically elected Congress?

      And no, Congress cannot vote to shift its power to declare war to an unelected bureaucrat. Don’t try to pull that fig leaf of the Iraq War Resolution. Article 1 Section 8 of the Constitution is clear on the matter. And as the founding fathers said,

      Thomas Jefferson called it “an effectual check to the Dog of war.” George Mason said that he was “for clogging rather than facilitating war.” James Wilson stated: “This system will not hurry us into war; it is calculated to guard against it. It will not be in the power of a single man, or a single body of men, to involve us in such distress; for the important power of declaring war is vested in the legislature at large.”

      Several years after the adoption of the Constitution, James Madison would write: “In no part of the constitution is more wisdom to be found, than in the clause which confides the question of war and peace to the legislature, and not to the executive department.”

      So let’s hear a little outrage directed at all those unelected bureaucrats running around Iraq and Afghanistan ordering people to kill each other when Congress has still refused to declare war.

      1. charcad


        You’re doing such a good job stuffing and arguing with a strawman I truly hate to interrupt you. But I have to say it. You sir, are talking like a thoroughbred horse’s patut. If you don’t like that, take another look at the smugly arrogant (and profoundly ignorant) tone of your post.

        I am sure you were even more outraged when that undemocratically elected bureaucrat George W. Bush launched wars that were not declared by congress.

        If by this rant do you mean was I opposed to invading Iraq in 2003? Speaking as a Desert Storm veteran, yes, I was. Not only was I opposed, I so communicated this to everyone I could in late 2002 when it became obvious to me the administration was set on war. And I so taught my children in advance of the event. My daughter was speaking against it in her high school classes in early 2003. As a minority of one at that time.

        And when that unelected wrong sort of bureaucrat Donald Rumsfeld made decisions on troop levels

        If by this do you mean Rumsfeld and his gaggle of Jewish-Israeli-neocon advisors? Yes. I was especially outraged at the disgraceful treatment meted out by this fourth-rate cabal of draft dodgers and rat sneaks to Army Chief of Staff General Eric Shinseki for speaking the truth.

        The truth was that Cheney, Rummy and their gang were trying to do things on the cheap and sending far too few troops to effectively occupy Iraq. Not something the faux legend Colin Powell audibly said anything about, either. He has been rightly forgotten and dumped into the garbage can of history.

        Appointing General Shinseki to head the Department of Veteran’s Affairs is one of this administration’s very few bright spots.

        Thomas Jefferson called it “an effectual check to the Dog of war.”

        How did it happen that President Jefferson didn’t bother to obtain a “Declaration of War” from Congress for military action against the Islamic Barbary Pirate states of North Africa? Perhaps you might enlighten us all with your self-evident expertise on Presidential war powers.

  6. charcad

    George Lucas sure got it right in Star Wars III when he had Padme say: “So this is how liberty dies. With thunderous applause.”

    Is this what it’s really down to? Is everyone so weak the only way they can cope with the Blankfeins is by getting a bureaucrat to cap them? Cheer now because ya’ll won’t like it when that bureaucrat turns her attention and power in your direction.

  7. dlr

    Looks like we’ve got the classic case of herding cats here, but, how about a letter writing campaign to the FDIC urging them to do their duty and CLOSE DOWN Citibank and Bank of America? Both banks are clearly insolvent, and Sheila Bair, by allowing them to continue to exist is doing great harm to our country.

    Neither Bank of America or Citibank are going to start lending again until their balance sheets are repaired, one way or another. This could take YEARS, if we continue down the path we are on now, or WEEKS, if the FDIC forced them into receivership, with the BONDHOLDERS and SHAREHOLDERS taking the loss, as they ought to, instead of innocent third parties (the American taxpayers).

    The state of Citibank and Bank of America are going to be a drag on our economy for years, making the “Great Recession” much longer and deeper than it otherwise would be. Not to mention that the morally questionable behavior of the Treasury, and the Federal Reserve, and the FDIC, in propping up these banks is destroying the trust of the American people in their government.

    So, anyone have a good email address to send complaints to the FDIC?

    I dream of course.

  8. Justicia

    For those of you living in the “limited government” fantasy land, I suggest you wake up and look at 21st Century reality. The danger we now have is a citizenry so ill-informed and deluded by Faux News that it no longer understands how government works or how to exercise its powers over public officials.

    Stop hiding behind your cynicism, get up off your butts and act like free citizens in a democracy. Yves has given you good information and shown you where to pull on the levers of power — so stop complaining and take action.

    1. i on the ball patriot

      Justicia …

      You might be annoyed by me so I would like to inform you that I don’t live in the “limited government” fantasy and I detest the Murdoch propaganda machine.

      I live in the scamerican reality where the totally corrupt, non responsive to the will of the people government, has been purchased by a parasitic gang raping finance industry that is gleefully decimating the middle class.

      In essence you are asking me get behind a scheme that charges the biggest rapists a larger rape fee, a fee that they will easily pass on to the consumer rape victims in higher rape costs. To add insult to that you are asking me to do so by obsequiously petitioning the gangsters that put the gang rapists in power. No thanks Justicia!

      I would suggest that it might be you who is so, “ill-informed and delusional”, made so by the state propaganda machine that has taught you from the womb to accept the immoral and usurious gang raping banksters as normal, much like the abused child accepts parental abuse as normal. It is not normal Justicia. Usury is immoral!

      If you were well informed and not delusional you would realize that the constitutionally based ‘rule of law’ has been turned into a despicable farce, full of willfully and knowingly, deviously crafted, purposefully vague laws that are selectively enforced in order to maintain the established order.

      You might want to consider the source of the illusion you live in and why you accept such an obvious fantasy. I find that the majority of people who believe so strongly in the illusion are those who never tested it, and, those who have tested it but only at an upper level where there is some semblance of a ‘rule of law’, though it is still a scam slanted in the favor of the wealthy. And so you all fervently believe …

      You might want to go under the bridges and into the urban slums of scamerica and visit the homeless people there. They are the product of the scam ‘rule of law’ that has denied them opportunity. Ask them when was the last time they had a representative of their government visit them and administer to their concerns? Ask them when was the last time a sell out mercenary cop denied them their civil rights and ran them out of the wealthy merchant district for simply exercising their constitutionally guaranteed right to Free Speech and asking another human being for help. Ask them if they even give a shit about whether or not the biggest bankster rapist has to pay a higher rape fee than the smaller rapist bankster’s rape fee.

      You should also realize Justicia that there is a large and growing number of your fellow citizens that believe that those who vote, and thereby legitimize such a crooked government, are the real problem. They are not all cynics, rather they are good civic minded citizens who stand on principle, and, TAKE ACTION, by sending letters to their supervisors of elections and asking that their vote be counted as a ‘vote of no confidence’ in this crooked government, and at the same time they work to reveal the hypocrisy and corruption of this government and speak out against the scam electoral process.

      So Justicia, stop hiding in your illusion, get up off your butt and act like a free citizen in a democracy — write your supervisor of elections a boycott letter and get out on the streets and burn your voter registration card in protest.

      Deception is the strongest political force on the planet.

      1. Justicia

        Where to begin in addressing this diatribe.

        No, I will not burn my voter registration card. I am not deluded about how corrupt and contorted our government has become but I will continue to vote the bastards out at every opportunity I get — and not just once every four years during the Presidential Follies.

        I will vote for or against office holders at every level depending on whether their actions comport with my understanding of the best interests of my city, state and country.

        I will follow the actions of the officials they appoint and go to public hearings to raise hell when they propose stupid policies or actions that only benefit their cronies and campaign contributors.

        I will talk to my neighbors and colleagues at every chance I get about how and why the present system is corrupt and controlled by big money and what we can do to fight against it.

        I will not be fooled into giving up what power I do have by angry people like yourself who counsel foolish actions like non-participation. I will fight for the freedom that is my birthright by every peaceful means at my command.

        1. i on the ball patriot

          Justicia, when you get off of your righteous high horse you might want to go back and reread my comment. You have grossly mischaracterized what I said, made false attributions about me and put words in my mouth.

          And don’t worry about being fooled by me into giving up your power — you have already done a splendid job of fooling yourself. And remember Justicia, when they stick that little paper badge on you at the poling station, the one that says, “I voted! I made freedom count!” — like those little reward stars your teacher would give you in grade school — that people like you who vote ARE the problem.

          When you play in a known crooked game you validate the crooked game and you deserve to lose.

          Deception is the strongest political force on the planet.

  9. dlr

    I agree with Sheila Bair’s take on this issue 100%. There is absolutely no doubt whatsoever that these CEOs have a short term, opportunistic attitude towards the companies they run. They have proven that it is unsafe to give them stock options as part of their compensation package. They are willing to destroy the companies they run so as to reap the maximum benefit from their stock options. They have shown themselves willing, over and over again to put their short term interests ahead of the larger interests of the company, the public, and their shareholders.

    We are told by self interested shills, that the only way to get “the best” CEOs to run these companies is to pay them obscene amounts of compensation. This is entirely false. In fact, it is the exact opposite of the truth. By being willing to pay such obscene salaries and benefits and ‘bonuses’ we attract amoral and opportunistic individuals to the job, and corrupt the ones already serving. By making the stakes so high for “success” we tempt them to engage in the most reckless and irresponsible behavior to maximize their ‘take’.

    Any compensation package, whatsoever, that exceeds $300,000 ought to be submitted to the shareholders for approval. And compensation package should be VERY VERY broadly defined, including not only base salary and bonuses, but ‘benefits’, ‘loans’, ‘golden handshakes’, and their ‘retirement package’.

    These companies are being driven into the ground by short sighted, amoral, reckless and irresponsible men willing to GAMBLE with other people’s money for private gain. Time to shut down the casino. If they aren’t willing to run these companies for a reasonable salary, all I can say is “Thank God”. Let them step aside and have the Board of Directors find someone who is less morally blind.

    Knoxville, Tennessee

  10. dlr

    The SEC should be urged to take action on this issue. It’s very easy to submit comments and suggestions to them at their web site. And the fact of the matter is, if the SEC would take up the issue of shareholder rights in general it would do a lot to curb a lot of corporate abuses going on now.

    The way things are set up now shareholders are almost powerless to control the companies they purportedly own, on any issue from CEO compensation to minimizing pollution to political campaign contributions to how much of the companies profits are distributed to shareholders as dividends.

    Right now, most companies are organized so that if a Board Member runs for election unopposed all that is needed is ONE VOTE to elected him. And 99% of all Board Members run unopposed.

    Additionally, most companies are organized so that shareholder resolutions, even if voted for by 100% of all the shareholders in the company ARE ADVISORY ONLY. The Board is not required to implement the resolution.

    CEOs and Board’s have stolen these companies from the shareholders, and run them as a self perpetuating oligarchy.

    The negative effects of the recent decision of the Supreme Court could be easily neutralized if shareholder resolutions were passed requiring companies to gain the consent of their shareholders before they started a “public relations campaign” to influence public policy. The shareholders might consent to spending corporate dollars on issues directly related to the company itself, but any other kind of “issues advocacy” would be a very tough sell.

    And if shareholder’s had the right to vote on the compensation packages of the executives that worked for them, executive pay would be brought down to earth again in very short order.

    Time for more democracy where it really matters these days, in the mega corporations that control our lives.

  11. Wil

    I also strongly support the FDIC proposal to link deposit insurance premiums to bank compensation practices that encourage or lead to excessive risk-taking by bank managements. Ms. Bair is to be commended for this idea and I greatly admire her independence.

    Separately: here’s an anecdote that may be of interest. I was in a Sears store recently to make a modest clothing purchase. At the checkout the clerk asked me if I held a Sears credit card; I explained to her that I had cancelled my Sears card some time ago because Sears was using Citibank as their issuer (and the credit terms were outrageous). The clerk offered that, if I would sign a new credit card application I could get the merchandise for free! I chose not to do so and paid for my purchase with a debit card from a local institution. I refuse to ever do business again with Citi or their ilk, either for credit cards or any other banking business.

    Wilmington, DE

  12. rita

    Shouldn’t a well designed compensation program be used to address the performance and capabilities of management and the board, which in turn should be used to determine risk-based assessments?

    The proposal to reward (by reducing insurance rates) for employee compensation plans that appropriately address long term and short term risks seems like a good idea. I have mixed feelings about laying out specific aspects of the program (e.g. restricted stock) Rather than defining certain aspects of such a program , I think setting out what the goals of a good compensation program should be and then requiring that every aspect of that program be tied to achieving those goals might be a better approach. Defining certain aspects of such a program leaves open the possibility of management coming up with schemes to defeat the specifics. So, for example, why not say that if a well-designed program permits compensation and/or bonuses based on achieving certain metrics, that there must be legally effective clawback strategies if there are material deteriorations over a certain period of time in those same metrics instead of requiring that a good program include restricted stock?

    With regard to the question of the development and performance of the plan, the independence of the members of the comp committee and their independent consultant is key. Payments to the consultant should be authorized by the comp committee so that the consultant knows who its customer is. The committee should reveal in its minutes, why particular advice from the consultant is rejected. Once good policies and procedures are developed, then the number and frequency of material exceptions should be taken into consideration when evaluating the effectiveness of the board (and management).

  13. Jim Sward

    Go for it. I am a retiree watching the world around me curmble. I see incompetence in all our local, state, and national governments. Somebody has to take action to turn this around and it looks like it could start with you. YES, bankers pay should be part the regulators review. This should be done by viewing how his performance matches the banks “Mission Statement”. I would suggest that he send you or your appointee a written statement to justify his pay and that the statement should have been approved by the B of D and the shareholders.
    Good luck and remember a lot of us who lack influence are with you.

    Jim Sward, Seneca, SC

  14. TV

    Treat the banking system like MUNICIPAL UTILITIES

    DELEVERAGE to 10-1.


    Pay expectations LOW compared to investment bankers.

    INCENTIVIZE STABILITY over Absolute Profit

  15. ep3

    it’s a start. If Alan Grayson supports it, so do I.

    I know this is easier to pass than most everything else. But I prefer two things. 1. Tobin Tax. 2. Top marginal tax rates at 90%.


  16. Gimanasih

    Thanks, Yves, for continuing to fill us in on what the banksters and their cronies are up to in Washington.

    I agree that the FDIC should demand higher rates of insurance from those banks paying compensation packages higher than, say, $300,000 (everything included). Please add my name to your list.

    Thank you.

  17. chas

    Would someone please explain to me what paying anyone a $17 million bonus has to do with the long term viability of our economy & our country when 8 (17?) million Americans are unemployed.

    I support the new FDIC proposal on executive compensation.

    Charles F. Toney
    Plano, Texas

  18. chas

    Sorry, had to edit. Forgot about sports “stars”?

    Would someone please explain to me what paying anyone (who bankrupted their bank in 2008) a $17 million bonus has to do with the long term viability of our economy & our country when 8 (17?) million Americans are unemployed.

    I support the new FDIC proposal on executive compensation.

    Charles F. Toney
    Plano, Texas

  19. David Artz

    I am in favor of the new FDIC proposal on banks executive compensation.

    David Artz
    Dripping Springs, TX 78620

  20. Alan Fenicle

    I absolutely agree with Ms Bair’s proposal.It is forward thinking without being punitive. This is not a populist move but rather addressing a systemic issue with a workable solution. I applaud and support it.

  21. Karen

    Specifically addressing the questions in the Request for Comments section of the FDIC proposal:

    (1) No

    (2) Yes

    (3) One thing to look for is whether performance-based compensation is awarded based on anticipated future profits (including profits already collected, but at risk of being wiped out by future poor performance) from deals or investments that have not yet been closed out.

    (4) Probably not, since the overall magnitude of compensation cannot capture the extent to which compensation encourages or discourages risk-taking. A better measure might be the extent to which different employees at ostensibly similar levels of responsibility have widely disparate compensation levels.

    (5) Include all insured depositary institutions, and all activities which create risk for the DIF. If trading-desk customers and trading partners cannot legally claim beyond the assets commanded by the trading arm of the institution, so that the trading activities do not threaten the bank’s ability to pay depositors (nor are their profits used to meet regulatory requirements), then trader compensation does not need to be addressed by the FDIC.

    (6) This is very hard to say. Probably quite large, since this penalty falls on the shareholders rather than the employees themselves. Better to focus on collecting enough money to be able to protect depositors and taxpayers after failures, using historical relationships between compensation practices and subsequent demands on the DIF (or other one-time rescue plans like TARP, which might not be available in the future) as a guide.

    (7) If the activities of holding companies and affiliates affect the institution’s ability to pay depositors, their compensation programs should be considered. If there is a clear, unambiguous legal and accounting separation, they should not need to be considered.

    (8) If the activities for which the employee receives performance-based compensation pose a risk to the depository institution, that employee’s compensation should be considered.

    (9) All performance-based compensation should at least be evaluated. In general, it should be sufficient to apply premium increases only on the basis of executives and those employees who are in a position to place the institution at significant risk, but it is possible that some institutions would respond to this policy by shifting risk-taking incentives to large numbers of lower-level employees.

    (10) As broadly as possible, of course! Exact dollar values would have to be determined on (not before) the vesting date.

    (11) Ideally, the performance-based portion of compensation should not be awarded until the risks associated with that employee’s “successes” terminate. Even if the employee has already changed employers by then.

    (12) Yes. But the adjustment should also be a function of the worst-case possible losses that could result from investments that form the basis for the bonuses.

    (13) Bonuses should vest only when the profits on which they are based are safely in hand, and should not necessarily be awarded even then if the same employee has since created new and larger risks for the firm.

    (14) Should not be a set time but should instead be tied to the duration and magnitude of the risks resulting from the employee’s activities. Rewards for “profits” generated by any employee’s activities (or those of his/her department) should vest when the profits are no longer at risk of vanishing due to a souring of the relevant investments.

    (15) Risk-adjusted profitability is fine as the yardstick for compensation, as long as “risk” is defined based on the true worst-case scenario, however unlikely that scenario may seem at any given time. So for instance shorting stocks (or anything else) without first buying them would have an infinite possible loss and should therefore not even be allowed.

    In closing, I believe the Glass-Steagall concept of placing strict limits on permissible activities of depository institutions is the best way to regulate such institutions. Dealing with the consequences of greater freedom of deposit-taking banks to take greater risks in new ways only by making adjustments to FDIC premiums will require an unreasonable level of effort if it is to avoid being “gamed,” it seems to me.

    Karen Williams
    Duvall, WA

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