WASHINGTON - Big banks took a beating from government on
Thursday, both in the U.S. Congress where lawmakers backed tougher
industry rules, and from U.S. and UK regulators who moved aggressively
to restrain bankers' pay.
A U.S. House of Representatives
committee voted in favour of setting up a new financial consumer
watchdog agency, a key Obama administration financial reform initiative.
The same committee, led by Democratic Representative Barney Frank,
also voted to move forward by three months to December 1 the effective
date for implementing strict new regulations on credit card rates and
Both decisions were only incremental since the full House, and the
Senate, have yet to consider the proposals. But if adopted, they would
threaten the profits of megabanks ranging from Citigroup to Bank of America.
Democratic Representative Brad Miller, a committee member, called
the vote to set up the watchdog agency "a rifle shot at abusive
"It's no surprise that the lenders with the worst practices are
still fighting tooth and nail against this bill. The last thing they
want is to have to make an honest living," he added.
But committee Republican Representative Brad Hensarling blasted the consumer agency idea.
"A government agency, no matter how well intended, cannot be a
complete substitute for personal responsibility and an open and
"While this bill has passed the committee and is one step closer to
enactment, consumers should ... reject the false promises of this new
federal government power grab," he said.
Executives at Citigroup and Bank of America would be hit by Feinberg's pay cuts, as would top earners at former insurance giant American International Group, automakers General Motors and Chrysler, GMAC and Chrysler Financial.
SENATOR: OUTRAGE OVER WALL ST PAY
"The American people are outraged that the same people on Wall Street who helped cause this major recession are going right back to their greedy and irresponsible ways.
"I applaud the Obama administration for taking an important step
forward in trying to control the obscene compensation packages of the
top executives on Wall Street," Senator Bernie Sanders, an independent, said in a statement.
The Federal Reserve weighed in on the pay issue, as well, issuing
guidelines to rein in compensation and discourage excessive risk-taking
at the almost 6,000 banks it polices.
"These proposed rules will likely affect compensation for hundreds
if not thousands of professionals working in our industry," said
Timothy Ryan, president of the Securities Industry and Financial
Markets Association, a lobbying group.
In London, the Financial Services Authority said it will take action
against banks that channel profits into bonuses rather than building
The FSA also said on Thursday that banks should start drawing up
"living wills" so they can be unwound quickly in times of crisis to
prevent economic destabilisation.
Just over a year since the global financial system skidded to the
brink of disaster, with taxpayers worldwide ponying up for a massive
rescue program, the U.S. and EU governments are trying to reform financial regulation.
With an eye towards preventing another crisis, officials are pushing
for better consumer protection, stronger bank balance sheets, more
oversight of unregulated markets, pay structures linked to long-term
performance and new protocols for governments to deal with large firms
that are in trouble.
After months of delay due to the U.S. Congress' preoccupation with healthcare reform, the Obama administration has begun to win votes in the House on key reform proposals.
But analysts said these actions only underscore that the real fight over reform lies weeks ahead in the Senate.
(Additional reporting by Rachelle Younglai, Karey Wutkowski and Mark
Felsenthal in Washington, and Huw Jones in London; Editing by Jan