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New rules for banker bonuses

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JEREMY HOBSON: To Wall Street now, where we could get some new rules on those big banker bonuses everyone loves to hate. Financial regulators are expected to unveil proposals designed to hold back or claw back compensation from top executives and traders. That’s to make sure they don’t make risky deals, then cash in their 6-and-7-figure bonuses, only to see the deals blow up later.

Marketplace’s Mitchell Hartman explains.


MITHCELL HARTMAN: The new rules from the Fed and FDIC will require “holdbacks” — that’s paying out bonuses over several years instead of all at once. And “clawbacks” — which let a firm reclaim bonus money if a risky deal by an executive or trader goes bad.

Charles Elson directs the University of Delaware’s Center for Corporate Governance.

CHARLES ELSON: Delaying the payment of a bonus, and using a restrictive stock in place of cash, is really the ideal way to align the interests of the employee with the long-term interests of the shareholders of the company. And I think discourage people from taking the kinds of risks that ultimately get companies in trouble.

Christopher Whalen at Institutional Risk Analytics says caps and clawbacks are likely to get even tougher.

CHRISTOPHER WHALEN: So you’re going to see this go on for years — it’s going to get very ugly for people who work in finance.

Wall Street bonuses are actually down slightly this year, according to Bloomberg. But a 10-year veteran oil or bond trader will still take home a million in compensation.

I’m Mitchell Hartman for Marketplace.

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