October 23, 2009

The Federal Reserve weighed in on the hot-button issue of executive compensation on Wall Street Thursday, outlining a proposal that would impact the entire banking industry by seeking to ferret out and rectify situations where risk assumption can be influenced by pay potential. The Fed issued a statement that describes two, separate supervisory initiatives.

The first would set up a special review process for "28 large, complex banking organizations," which presumably include companies such as Bank of America(BAC Quote), Citigroup(C Quote), Goldman Sachs(GS Quote), JPMorgan Chase(JPM Quote), Morgan Stanley(MS Quote), Wells Fargo(WFC Quote), and many others. These institutions would be subject to a 'special "horizontal" review," which the firm said would entail "a coordinated examination of practices.