by Peter Gorenstein
There’s no absence of backlash and outrage over the billions Wall Street bankers will take home this year in bonuses. What’s missing is a solution.
The FDIC in a proposal made Tuesday, said it wants employee compensation to be another factor in how it determines bank payments to the insurance fund.
In other words, the riskier the bank’s compensation structure the more they should pay into the total insurance pot. William Black, economics and law professor at the University of Missouri – Kansas City, tells Henry the proposal doesn’t go far enough to align the interest of the bank employees with the long-term interest of shareholders.
To solve that he’s proposing:
- Clawback provisions.
- Paying bonuses in stock. Black says employees should be restricted from selling stock for years.
The former regulator during the Savings & Loan Crisis also recommends reinstating mark-to-market accounting. Until that’s done, he says, there’s no way to tell whether 2009 paper gains won’t be wiped out in the near future if the market sours again. Black argues “people are being paid bonuses when the company, the bank has actually lost tens of billions of dollars. That’s an obscenity.”