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« Simon Johnson: Tax The Bastard Bankers Until They Bleed And Cry For Mercy | Main | Fleckenstein's Turn To Bury Bernanke (Video) »
Wednesday
Jan132010

William K. Black: Attention Congress! Here's How to Solve the Wall Street Bonus Problem

Video:  William Black with Henry Blodget from Tech Ticker -- January 13, 2010

There's no absence of backlash and outrage over the billions Wall Street bankers will take home this year in bonuses.  There are plenty of common sense solutions: A bonus tax on bailed out bank employees; a tax on TBTF banks; requirements that bonuses be paid in deferred stock, and more.  What's missing is political will; Congress needs to listen to voters and not financial lobbyists, and deliver legislation that ends the charade.  Bill Black has some ideas.

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." 

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Transcript, yes.

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Reader Comments (1)

William K. Black: "Attention Congress! Here's How to Solve the Wall Street Bonus Problem"

Congress: "Oh look! Nordstrom's is having a half-off sale on cufflinks!"
Jan 14, 2010 at 4:54 PM | Unregistered CommenterRecoverylessRecovery

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