May 14, 2009

The Obama administration wants government to have a say in how financial institutions pay their employees and is working to change Wall Street practices so that compensation is more closely tied to performance over time.The attention to pay practices arises from the Obama administration's belief that lucrative compensation packages encouraged financial sector executives to engage in short-term risky ventures that had adverse consequences and contributed to the financial crisis.

Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke, as recently as last week, called for new compensation standards and principles that would guide banks and other institutions. Options include giving the Fed, which regulates banks, and the Securities and Exchange Commission, which oversees the financial markets, greater powers to set those standards.The financial industry is watching warily and is discouraging policymakers from setting rules that are too stringent.