May 27, 2011
Elizabeth Murphy
100 F Street, NE
Washington, DC 20549
Dear Murphy,
America paid a terrible economic price because of irresponsible risk-taking by Wall Street executives. Those executives took those risks because they knew that they could walk away with billions of dollars in bonuses and stock options and never pay for the long-term consequences of their actions. We need tough rules so that Wall Street pay packages don't encourage short-term risk taking.
Your rules should require at least a five year deferral period for executive bonuses at big banks, ban executive hedging of their pay packages, and require specific details from banks on precisely how they ensure that executives will share in the long-run risks created by their decisions. It should apply to the full range of important financial institutions, and draw in all the key executives at those companies.
It is not coincidental that corporate managers started on the path of short-term and usually economically destructive decision making at the time when it became fashionable to include large chunks of stock options as part of pay packages. Vesting managers, rather than encouraging long-term profitability, simply created an atmosphere of unmitigated risk taking designed to gull stock traders into buying frenzies in order to drive up stock prices which CEO's then cashed in for vast profits. The actual fiscal health of corporations mattered not at all, only the short term profit taking. Ban stock options as part of pay packages.
Once this rule is passed, only you will know the details of its enforcement. But it's important for the public to know the progress you are making on this vital issue. You should report back to the public annually with a detailed report on progress in creating accountability for Wall Street pay.
Referencing Docket No.'s:
OTS: RIN 155-AC49
OCC: RIN 1557-AD39
Fed: RIN 7100-AD69
SEC: RIN 3235-AL06
FHFA: RIN 2590-AA42
FDIC: RIN 3064-AD56
Sincerely,
Mr. Sanford Silver