(NYT) WASHINGTON — The Federal Reserve and the Treasury are preparing broad new rules that would force banks to rein in practices that made multimillionaires out of many financial executives during the housing bubble, officials said.
The rules depart from the hands-off approach that dominated bank regulation for the last three decades, but are not as strict as proposals from some European leaders and suggestions from some members of Congress angered by the financial troubles of the last year.
Fed officials would give banks wide leeway in how they structure their rewards. They would not prohibit million-dollar pay packages or address issues of fairness. Rather, the rules are intended to restrict pay plans that encourage reckless behavior by rewarding only short-term gains. And because the rules would be applied through the confidential bank examination process, it would be hard for consumers and investors to judge how strictly the rules were being applied.
The effort is also meant to be an alternative to proposals by some European leaders for specific limits on bonuses to financial executives, an idea opposed by the Obama administration. Officials from Europe and the Treasury are negotiating . . . Read more here.