By Roxana Tiron - 10/25/09 04:07 PM EDT
Sen. Charles Schumer (D-N.Y.), one of Wall Street’s most consistent
supporters, on Sunday defended the Obama administration’s moves to rein
in executive pay and reform financial firms that received public
Schumer tried to dispel the notion that the measures are “punishment,” which ultimately would lead to an exodus of executives and brainpower from Wall Street.
Kenneth Feinberg, the Treasury Department’s special master for compensation, said last week that he halved, on average, the total pay for the executives he scrutinized at 175 firms, including Bank of America, Citigroup Inc. and American International Group Inc. The Federal Reserve also announced guidelines meant tie bank compensation to risk management.
The Obama administration seeks to address unchecked risk-taking fueled by excessive pay with the measures announced last week.
Sen. John Cornyn (R-Texas) on Sunday said that it is difficult to interpret the moves as anything other than “punishment,” and that they lead to a “growing apprehension of government intervention” in too many areas.
Schumer expressed confidence on Sunday that Feinberg’s move “is supposed to keep them [executives] around,” and that it will not hurt the effectiveness of those companies.
“When the government is giving massive amounts of money and these people [would have been] out on the street, the rules are different,” Schumer said.
Schumer last week also prodded Feinberg to take broader steps to fix the system in the long term. In a letter to Feinberg last week, he asked the “pay czar” to consider mandating broad corporate governance reforms, such as instituting a shareholders bill of rights. Schumer, together with Sen. Maria Cantwell (D-Wash.), has proposed a shareholders’ bill of rights to give shareholders greater control over corporate boards and improve corporate accountability and transparency.
“While reigning [sic] in compensation practices at these firms is certainly necessary to ensure that taxpayer money is well spent and not squandered on lavish pay, executive compensation is just the tip of the iceberg when it comes to the practices that so recently put our entire financial system at risk,” Schumer wrote to Feinberg Oct.22.