The Federal Reserve is moving to restrict compensation practices at the nation's large banks. The government wants to stop pay practices that threaten to distort incentives for chief executives to loan officers.
The Fed, in its role as the lead regulator of the nation's biggest banks, is looking to monitor pay practices at banking institutions as part of its responsibility to ensure their safety and soundness. The Fed does not wants to set caps on the amount of pay any given employee can receive, but to restrict banks from paying employees in ways that create long-term risks to the institution.
Private analysts and Fed officials argue that pay practices emphasizing short-term performance contributed to the excessive risks that large banks took during the run-up to the financial crisis.
See the rest of the article at http://www.washingtonpost.com/wp-dyn/content/article/2009/09/18/AR2009091802045.html?hpid=topnews
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