Pay limits await the financial industry

After the stress test, talks about compensation are back on the table.  The Obama administration is pondering about an overhaul of the compensation received not only by investment banks but also of others entities (that are more loosely regulated) such as hedge funds and private equity firms.

From the NYT:

Obama Administration officials are contemplating a major overhaul of the compensation practices in the financial services industry, moving beyond banks to include more loosely regulated hedge funds and private equity firms.

Among the ideas under consideration are incorporating compensation as a “safety and soundness” concern on official bank examinations as well as expanding the existing regulatory powers of the Securities and Exchange Commission and Federal Reserve to obtain more information.

I agree with a performance-based compensation, regardless of the amount but what I’m more interested in is how the regulators will act upon the risk-taking of these individuals.  That and how it will be done without necessarily interfering with free-market principles/promoting overregulation and big government.

Another report from the WSJ HERE.

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