CNN Financial News Producer
Officials in Washington today launched their biggest offensive yet in the war on runaway pay practices in the financial industry, targeting everyone from corporate executives to high-flying traders of complex securities.
The Federal Reserve proposed a sweeping review of pay policies at 28 of the nation's largest banks as part of an effort to make sure employees are not tempted to make the kinds of bets that could put their company at risk of going under.
The central bank said it also planned to review compensation practices at the thousands of regional lenders that make up the bulk of the nation’s banking industry as part of its standard review process.
Separately, the Obama Administration's so-called “pay czar,” Kenneth Feinberg, unveiled sweeping pay cuts for 136 top executives at the seven biggest companies that received a bailout.
Feinberg is demanding that AIG, Bank of America, Citigroup, Chrysler, General Motors, GMAC and Chrysler Financial slash compensation packages for their top 25 most highly-compensated employees by about 50%.
The bulk of those cuts will come from annual salaries, which are expected to fall 90% on average.
Today’s developments represent what is perhaps the most sweeping push yet by Washington to rein in Wall Street’s pay practices. But some compensation experts warn that the actions could have a disastrous series of unintended consequences, including the loss of top employees to companies that are not subject to government restrictions.
What about Goldman?
But the moves by Feinberg, appointed the Treasury's “Special Master for Compensation” in June, will not impact other financial giants like Goldman Sachs, JPMorgan Chase and Morgan Stanley - firms that are on track to pay out record bonuses this year.
Revenue projections for those firms keep rising, and analysts say bonuses will be back on track for another record year following a one-year nosedive in 2008. Goldman Sachs said just last week that it set aside $16.7 billion for salaries, employee stock options and bonuses. That works out to about $526,814 for each and every one of Goldman’s more than 30,000 employees.
How is this possible? Or for that matter even legal?
The more than 600 companies that have received capital investments from the $700 billion bailout are subject to executive compensation curbs, including limits on perks and golden parachutes.
Companies like Goldman and JPMorgan, however, have paid the government back the billions of dollars in taxpayer bailout money they received, so they’re no longer under the Treasury’s thumb.
Jobless claims jump
The number of first-time filers for unemployment insurance rose last week, snapping two weeks of significant declines.
There were 531,000 initial jobless claims filed in the week ended Oct. 17, up 11,000 from an upwardly revised 520,000 the previous week, the Labor Department said in a weekly report. The week included the Columbus Day holiday.
In addition, the number of people who continue to collect benefits for one week or more fell by 98,000 to 5,923,000.
So why are continuing claims falling while initial claims are rising?
That’s because about 7,000 people a day exhaust their unemployment benefits. In fact, more than 200,000 people will fall off the rolls in October alone - and 1.3 million will lose their benefits before year's end - if Congress doesn't take action.
And one month after the House passed a bill extending unemployment benefits, the issue is still being debated in the Senate.
Democratic leaders in the Senate introduced a bill two weeks ago to lengthen benefits in all states by 14 weeks. Those that live in states with unemployment greater than 8.5% would receive an additional six weeks.
Senate Republicans want to add several amendments, including one that would pay for the extra benefits with stimulus funds rather than by extending a federal unemployment tax.
Leaders in both parties are now trying to negotiate a compromise.
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Filed under: Andrew Torgan • Economy • Finance • Treasury Secretary • U.S. Federal Reserve
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If those companies are so worried about offerring competitve salaries as a result of the mandated reductions, maybe they should consider that, in lieu of a single exec's $38 million salary package, they could hire 76 employees at an average salary of $500K. Now, what are they complaining about – they would add jobs, and probably have better quality employees who may actually perform!
Yes; the CEO's should be paying us back. The government helps these banks and or financial institutions out with tax payers money. How and why is this happening? CEO's robbing the american public, while people are losing their homes, jobs, living out in the streets, wondering where their next meal is coming from. It's not right. And the employment situation in this country is getting worse not better. So these stimulus packages how are they helping? Not helping the blue collar worker.
Since the pay czar is making policies for the President what use do we have for Congress.
He has no legal grounds for this. The president doesn't have the authority to cut, limit, or collect any money, taxes or duty from anyone.
Only Congress can do that.
Since when does a private citizen have the authority to speak for President or the FED GOV. He not an elected official of anything.
He is just another Obama talking head so Obama doesn't have to take any blame or time off the campaign trail.
It's about time for tougher regulations in the financial industry! But there needs to be more regulations to deter high-risk taking by these executives. Unfortunately Goldman Sachs and JP Chase are exempted even though they help to contribute to the financial meltdown and received the benefits of taxpayers' bailout. Something is definitely wrong to reward that kind of bad behavior!
What ever happen to caring about the people. What ever happen to being responsible for your actions. What ever happen to that? I don't for ONE second believe these companies will lose "top talent" by limiting pay. If anything it will clean away the crooks. Why won't the "top talent" stand up for something other than a paycheck? In a time of need, you they should come to serve your country. After all, how many of these "top talent" individuals are enlisted in the military?
P.S. I've ridden on Sumner's Jet and its great. But a little unnecessary.
These CEO's should be paying us back