Jamie Dimon has officially been put on notice: A group of federal regulators staffed by Trump appointees is reportedly taking another look at tightening restrictions on Wall Street executive pay.
According to the Wall Street journal, three bank regulators are discussing whether now would be a good time to revive a crisis-era proposal that would require the biggest banks to delay some executive compensation, and even claw back some of their bonuses if losses start piling up. The three regulators involved, per WSJ, are the Fed, the FDIC and the Office of the Comptroller of the Currency. Surprisingly, some bank executives have warmed to the idea, believing it would be better for such restrictions to be enacted now under Trump than later should Democrats retake the White House.
Whether or not the rules are enacted this year or next, executives have probably accepted the fact that, more likely than not, they will take effect at some point: The Dodd-Frank financial oversight law passed in the wake of the crisis requires that curbs on executive pay be enacted. Discussions that took place during the Obama administration were eventually scrapped amid widespread industry opposition.
Spokesmen for the Fed and OCC said their agencies are committed to finishing the rule, while the FDIC didn't comment. The SEC and two other banking regulators would also have a vote on the proposal.
When it comes to executive compensation, much has changed since the crisis. Instead of receiving their bonuses in cash, most executives are paid in stock to keep their interests "aligned" with those of the bank's shareholders. And while their overall compensation hasn't quite returned to pre-crisis highs, as bank profits have climbed (bolstered by President Trump's tax reform law), compensation - particularly bonuses - has also risen.
Last year, Jamie Dimon was paid more than $30 million, becoming the first Wall Street executive to earn more than $30 million in a single year since 2007.
The Dodd-Frank law, passed a year later, mandated new rules to limit payouts and more closely align them to firms’ long-term financial health. Pay fell sharply in the postcrisis years, in part because of this backlash and in part because bank profits sank.
As those profits have rebounded, pay is starting to tick back up, although pressure from shareholders has led banks to replace big cash bonuses with more stock awards and performance-based metrics.
When last proposed in 2016, the rules would have required the biggest financial firms to defer payment of at least half of executives’ bonuses for four years, a year longer than common industry practice. It also would have established a seven-year clawback period, in which executives would be required to return their bonuses if their actions hurt the institution or if a firm had to restate financial results.
And already, the regulators are behind the ball: As Bloomberg pointed out, the original Dodd-Frank deadline passed eight years ago. Fed Vice Chairman for Supervision Randal Quarles told lawmakers at a recent hearing that he had no schedule for finishing the required rule, but he called it "an important issue, and it’s something that we will be discussing."