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According to Bloomberg, Frank told reporters last night that "there should be a moratorium on bonuses." Frank told Bloomberg that bonuses "have a negative incentive effect because they are the ones that say if you take a risk and it pays off you get a big bonus,'' and if it causes losses "you don't lose anything."
Frank added that the freeze "ought to be for all firms" -- not just
for those taking advantage of the bank bailout plan -- and that it should
last "until they can get a better structure without that perverse
incentive."
Such a move is likely a nonstarter as banks and other financial firms would likely see an exodus of talent to hedge funds and private equity shops, which would still be free to offer bonuses. Additionally local government may be unhappy with Frank's suggestion because state's like New York and New Jersey receive tax windfalls from bonuses. Additionally, local businesses in those states also rely on bonus cash for big-ticket sales. - George White See Bloomberg story CategoriesComments
From: Bob,
Every time Barney Frank opens his mouth he demonstrates what is either a complete lack of intellect or a blatant politically motivated pandering on the political issue of the moment. It seems he has a fundamental inability to understand or acknowledge basic free market principles. The Deal should not lend credibility by publishing this nonsense.
Posted on:
October 22, 2008 1:58 PM
From: Steve,
If anyone's compensation for bad performance should be affected, Barney's ought to be high on the list, given how his gift of sub-prime everything has been bestowed upon all of us. His constituents could do us a big favor by making him irrelevant (just another taxpayer) at the first opportunity.
Posted on:
October 22, 2008 5:39 PM
From: just.a.guy,
I'm sick of reading the assertion that if large Wall Street bonuses are curtailed, that the talent will just flee to Private Equity and Hedge Funds. Which private equity firms are those, exactly? The ones with all the troubled companies bought with borrowed money at 7-9x leverage? The ones whose LPs are showing increasing reticence to meet capital calls? And which hedge funds? The ones suffering record monthly losses and redemptions? The fact is, you could eliminate Wall Street bonuses and there would be nowhere for these people to go, at least in the financial sector. Given that many of them possess no broadly marketable skills, the moratorium on bonuses isn't a bad idea. But it should NOT be led by government. It should be led by Boards of Directors looking out for their common shareholders who have been blasted in the past months. I am not holding my breath.
Posted on:
October 22, 2008 9:58 PM
From: Robert Barr,
Not for nothing, but the pendulum swings both ways Barny...you guys haven't been doing so well yourselves my friend!
Posted on:
October 23, 2008 10:30 PM
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Wall Street may not like regulation, but they'll live with it. Now, however, House Financial Services Committee Chairman Barney Frank is going after something much closer to home -- the hallowed year-end bonus. The Massachusetts Democrat suggested a moratorium on bonuses until the Wall Street firms figure out a way to curtail excessive risk-taking by those looking for big year-end payouts.
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Finally somebody said something right. If we could make sure that bonuses are tied to performance, it would halt the corruption and greed. And in terms of having "the best" executives move to hedge funds ( given this years losses, I doubt these exces are really the best they seem more like average performers) I think regulating hedge funds should be next.