Will the clampdown on bonuses work?
Wall Street's "Charging Bull" statue
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Kai Ryssdal: White House pay czar Kenneth Feinberg made his bailout salary cuts official today. On average, reductions of about 50 percent for the top earners at the seven companies that got the most public money. Thing is, the people who brought in a lot of the money Wall Street firms made in over the past couple of years were farther down the ladder. Folks who were promised big bonuses to trade, sell or broker anything they could. So we asked Ashley Milne-Tyte to find out whether today's news will do much to discourage the behavior that landed us in this mess to begin with.
ASHLEY MILNE-TYTE: Not really. Nomi Prins is a former Goldman Sachs executive. She's written a book about the financial crisis called "It Takes A Pillage." She says these cuts won't reduce risks to the financial system. And they focus on too small a group of companies.
NOMI PRINS: It gives a free pass to the others that are by nature increasing the risk in the financial system because of the profits that are coming directly from their trading arms and because of the bonuses that are yet again being paid from those profits.
She says banks like Goldman Sachs are making huge profits from trading. And their pay structures still encourage risk taking.
Karen Ho is an anthropology professor at the University of Minnesota. She's studied the culture of Wall Street. She says the government's move is largely symbolic.
KAREN HO: I don't think that it is strong enough to influence Wall Street bonus culture, which is embedded in the very fabric of their cultural identity, and their incentive structure is tied to how they understand themselves, they understand talent.
She says it's not tied to whether a trade is successful in the long run. Eric Moscowitz says that should change. He's head of compensation consulting for Options Group in New York. He'd like to see the government insisting on clawback provisions.
ERIC MOSCOWITZ: When these risks are taken, and the money is lost in year two and year three, the banks need to be understanding that that money needs to come back to that investor or needs to come back to that shareholder as appropriate.
He says so far the government's left it up to individual banks to put those clawbacks in place.
I'm Ashley Milne-Tyte for Marketplace.