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Outrage on Pay

Last week, the Federal Reserve announced that bankers face sweeping curbs on pay, as the bureaucrats plan to limit how lenders can structure compensation for executives, traders, and most concerning, for tens of thousands of loan officers. There is no doubt that out of the carnage of 2007 to 2009 there is a view that compensation practices had a material, if not central, role in the excesses that almost collapsed the financial system globally. The Obama administration, shareholder rights groups, and John Q Public are outraged at incredible nine-figure bonuses that were paid out at AIG, Citibank and a host of other institutions. But come on. I expect that we are focusing on 2% of the workforce in the banking and finance system. I am the first to agree that it is critical that compensation be aligned with shareholder interests. However, that’s the job of the board of directors and the CEO. We are about to have the creation of a system that will enable the Federal Reserve, other oversight groups such as state banking authorities, and ultimately the honorable Barney Frank, to determine what a mid-rank loan officer at a local community bank will be compensated. Excuse me, but this is not good, nor healthy for our free-market system. It’s definitely not good for the banking system because, in all likelihood, this will make it less attractive for professionals to work in a bank as opposed to the shrinking private sector.

Tony LoPinto is CEO of Equinox Partners, an executive search firm specializing in the real estate industry, and parent company of SelectLeaders. The views expressed in this article are the author’s own.
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