Less than 24 hours after regulators moved to blitz banker bonuses, Wall Street was already buzzing about a few trick plays that would sidestep the confiscatory new rules.
The playbook to avoid the new rules approved Wednesday by the Federal Deposit Insurance Corp. includes advising a firm to take out a so-called Director & Office insurance policy that includes a “clawback” provision that would pay out in the event that the firm’s executives are deemed to be responsible for taking down the firm.
Critics have described the move by the FDIC as more stringent than clawback rules slated to be released by the Securities and Exchange Commission in a few weeks. The one-two combination, they say is an overreach by regulators.
Robert Novak, a lawyer at Jennings Strouss, told The Post that firms also are considering sidestepping strategies because they fear being unable to attract or retain talent fearful about being fingered for taking down the firm.
“We want to [give employees] at these firms some comfort that they are not going to lose a couple years of compensation if something goes wrong,” Novak says.
Novak says that until the precise language of the FDIC rules come out in a few weeks it is unclear if any of the avoidance strategies will work.
The FDIC under departing Chair Sheila Bair approved rules that allow the agency to claw back as much as two years of compensation and bonuses from key employees if they are deemed responsible or negligent for taking down their institutions.
Other officials fear the FDIC rules are fostering an anti-business environment and crimping novel thinking.
“This is like putting speed limits at the Indy 500,” said Jim Hatch, partner in charge of human resources at accounting firm EisnerAmper.
“Yeah, they might have made the banks safer, but it’s boring and it’s anti-innovation,” he added, noting that the new rules approved by the FDIC might seriously dampen out-of-the-box thinking or the development of new products.
(Source: NY Post)
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4 Responses
Hmmm….they didnt seem to sidestep taking our tax dollars to get a second chance. I say fine Wall Street HEAVILY and lend the money to people needing a second chance so they can invest it like Wall Street did. Wall Street OWES US!
The banks can play with their own money to their heart’s content. The banks can play with investors’ uninsured money to their heart’s content. That’s “their” money.
But if they want to use deposits from middle class (at best) depositors, who are relying on government insurance – they should be constrained. That’s “our” money.
akuperma is right on this one. Government-insured deposits are backed by all of us, and if the financial institution doesn’t want the draconian rules that should accompany the insurance, it should offer only uninsured deposits.
But what is really offensive is the way that these managers are acting. “not going to lose a couple years of compensation if something goes wrong”???? These thieves don’t really believe in free markets, they want to be free to make huge profits when things are good and be guaranteed a bailout when things go bad! This is the kind of nonsense that gives capitalism a bad name. Kudos to Ms. Bair for not caving on this, and to President Bush for having appointed her to head the FDIC.
Please note that Obama, Warren, and nearly all democrats want to hold the banks responsible for their actions, and all republicans want to let them off the hook.