Comments on: Guest Post: Big Brother’s Latest Attempt to Regulate Bankers’ Pay……And What to Do About It http://leapcomp.com/2009/09/guest-post-big-brother%e2%80%99s-latest-attempt-to-regulate-bankers%e2%80%99-pay%e2%80%a6%e2%80%a6and-what-to-do-about-it.html Thu, 09 Feb 2012 02:53:50 +0000 http://wordpress.org/?v=2.6 By: Scott Barton http://leapcomp.com/2009/09/guest-post-big-brother%e2%80%99s-latest-attempt-to-regulate-bankers%e2%80%99-pay%e2%80%a6%e2%80%a6and-what-to-do-about-it.html#comment-20397 Scott Barton Tue, 06 Oct 2009 21:23:55 +0000 http://leapcomp.com/?p=1039#comment-20397 Kerek, Thanks for your reply. My issue is NOT with pay for financial advisors nor insurance salesmen - both are already regulated (and new regs are coming for financial advisors). Rather, I'm calling out the continued, vague regulations for non-executive, sales employees in the commercial banking industry. The Fed proposal specifically lists loan officers as an employee group potentially targeted by the guidelines. While the reference is general, loan officers are typically affiliated with commercial banks, not investment banks. Congress already passed legislation to regulate bonus pay of the top 25 most highly-paid employees in TARP-participating banks, many of which are regional banks with no investment banking divisions. And technically, the Top-25 regulation can include non-executive salespeople. The point I attempt to make is that sales people (again, a potential target of the Fed's proposal) must, by nature, confront risk. Remove this risk and they have little motivation to exceed sales goals and compete. My point with the TSA example is rather than overhaul the entire system, which included the creation of an entirely new federal bureaucracy, the federal government could have made fixes to weak points in the existing system, like cockpit doors that couldn't withstand the force of a child's foot. Reinforce the doors, and you eliminate one of the factors that allowed recent hijackings. Restrict residential mortgages to only traditionally-credit-worthy prospective home buyers and you eliminate one of the factors that created the current credit crises. I know many of my clients are upset about continued pay regulations. Compliance adds cost. Additionally, every taxpayer should be upset with the level of folly that consumes the time of our elected officials. Remember the congressional hearings for MLB and steroid use? Good times. Scott Kerek,

Thanks for your reply.

My issue is NOT with pay for financial advisors nor insurance salesmen - both are already regulated (and new regs are coming for financial advisors). Rather, I’m calling out the continued, vague regulations for non-executive, sales employees in the commercial banking industry.

The Fed proposal specifically lists loan officers as an employee group potentially targeted by the guidelines. While the reference is general, loan officers are typically affiliated with commercial banks, not investment banks. Congress already passed legislation to regulate bonus pay of the top 25 most highly-paid employees in TARP-participating banks, many of which are regional banks with no investment banking divisions. And technically, the Top-25 regulation can include non-executive salespeople.

The point I attempt to make is that sales people (again, a potential target of the Fed’s proposal) must, by nature, confront risk. Remove this risk and they have little motivation to exceed sales goals and compete.

My point with the TSA example is rather than overhaul the entire system, which included the creation of an entirely new federal bureaucracy, the federal government could have made fixes to weak points in the existing system, like cockpit doors that couldn’t withstand the force of a child’s foot. Reinforce the doors, and you eliminate one of the factors that allowed recent hijackings. Restrict residential mortgages to only traditionally-credit-worthy prospective home buyers and you eliminate one of the factors that created the current credit crises.

I know many of my clients are upset about continued pay regulations. Compliance adds cost. Additionally, every taxpayer should be upset with the level of folly that consumes the time of our elected officials. Remember the congressional hearings for MLB and steroid use? Good times.

Scott

]]> By: Kerek Taylor http://leapcomp.com/2009/09/guest-post-big-brother%e2%80%99s-latest-attempt-to-regulate-bankers%e2%80%99-pay%e2%80%a6%e2%80%a6and-what-to-do-about-it.html#comment-19786 Kerek Taylor Sun, 27 Sep 2009 13:39:14 +0000 http://leapcomp.com/?p=1039#comment-19786 I'm confused. I've been on top of the suggested regulations on products and pay coming out of congress, the treasury and the fed. None of the pushback has to do with your vanilla financial advisors or insurance salesmen. No one is really upset with this...at least as far as I can tell. The pushback has to do with investment banking compensation, true investment banking, not financial advising or insurance sales comp as this article alludes to. This is a very well written article. I just think it's somewhat strawmanny in that it's creating an argument no one else is really having vis-a-vis compensation regulation...imo. Oh yeah, the binary TSA OR reinforced cockpit doors analogy doesn't necessarily hold for me. It seems to suggest that we shouldn't have re-engineered TSA processes at all, this can't honestly be your suggestion on its face or in relation to investment markets can it? Also if regulation is the TSA in your analogy I'm unclear as to what is the cockpit door? Kerek Taylor I’m confused. I’ve been on top of the suggested regulations on products and pay coming out of congress, the treasury and the fed. None of the pushback has to do with your vanilla financial advisors or insurance salesmen. No one is really upset with this…at least as far as I can tell. The pushback has to do with investment banking compensation, true investment banking, not financial advising or insurance sales comp as this article alludes to. This is a very well written article. I just think it’s somewhat strawmanny in that it’s creating an argument no one else is really having vis-a-vis compensation regulation…imo.

Oh yeah, the binary TSA OR reinforced cockpit doors analogy doesn’t necessarily hold for me. It seems to suggest that we shouldn’t have re-engineered TSA processes at all, this can’t honestly be your suggestion on its face or in relation to investment markets can it? Also if regulation is the TSA in your analogy I’m unclear as to what is the cockpit door?

Kerek Taylor

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