US financial regulators are focusing renewed attention on Wall Street pay and are designing rules to curb compensation packages that could encourage excessive risk taking.
Regulators are considering requiring certain employees within Wall Street firms hand back bonuses for egregious blunders or fraud as part of incentive compensation rules the 2010 Dodd-Frank law mandated be written, according to people familiar with the negotiations. Including such a “clawback” provision in the rules would go beyond what regulators first proposed in 2011 but never finalized.
Congress created a bureaucracy, and it expanded it enormously with that Dodd-Frank. Now the bureaucrats have to do something to justify their existence. Regulators gotta regulate. And so we get this.
Never mind that the free market is a fine regulator, and “certain employees” and their “Wall Street firms” employers will be severely and promptly regulated when those excessive risks fail.
Government intrusion isn’t just not needed, though, it’s counterproductive. Now businesses, on and off Wall Street, will incur additional costs as they seek compliance, additional costs as they seek work-arounds, additional costs from the expanded field for nuisance suits (and legally legitimate ones), additional costs as they’re forced to negotiate even more complex compensation packages in order to hire the best, rather than the second best.
Such regulatory nonsense also is in large part duplicative and so wasteful. For instance:
Some banks are already voluntarily recouping money from employees who engage in misconduct or excessive risk.
We already have adequate laws (not regulations) on the books to handle both criminal and civil misconduct. Additional regulation here would be useless.
Too, that some businesses think such procedures are appropriate for them does not at all justify government interfering to impose such procedures on all of business.
Update: Corrected a typo in the third paragraph: Government intrusion isn’t just not needed…. <sigh>