[classicman]

U.S. Eyes Bank Pay Overhaul
Administration in Early Talks on Ways to Curb Compensation Across Finance

WASHINGTON -- The Obama administration has begun serious talks about how it can change compensation practices across the financial-services industry, including at companies that did not receive federal bailout money, according to people familiar with the matter.

The initiative, which is in its early stages, is part of an ambitious and likely controversial effort to broadly address the way financial companies pay employees and executives, including an attempt to more closely align pay with long-term performance.

Administration and regulatory officials are looking at various options, including using the Federal Reserve's supervisory powers, the power of the Securities and Exchange Commission and moral suasion. Officials are also looking at what could be done legislatively.

Among ideas being discussed are Fed rules that would curb banks' ability to pay employees in a way that would threaten the "safety and soundness" of the bank -- such as paying loan officers for the volume of business they do, not the quality. The administration is also discussing issuing "best practices" to guide firms in structuring pay.

Regulators have long had the power to sanction a bank for excessive pay structures, but have rarely used it. The Office of the Comptroller of the Currency last year quietly pressed an unidentified large bank to make changes "pertaining to compensation incentives for bank personnel responsible for assigning risk ratings," a spokesman said. Since 2007, it has privately directed 15 banks to change their executive compensation practices.

Government officials said their effort, which is just beginning, isn't aimed at setting pay or establishing detailed rules. "This is not going to be about capping compensation or micro-management," said an administration official. "It will be about understanding what is the best way to align compensation with sound risk management and long-term value creation."

The Treasury is expected to issue new rules sometime in the next few weeks.

Interesting. So the Gov't is going to address compensation packages in private companies, some of whom did NOT take any of the bailout money.