May 27, 2011
Elizabeth Murphy
100 F Street, NE
Washington, DC 20549
Dear Murphy,
Wall Street insider Barry Ritholtz put it this way:
"In recent years, there was no legal liability for extreme recklessness. Take a healthy company, roll the dice and if it comes up snake eyes, all you lose are your unvested stock options. Most management does not have significant capital at risk. The cost for pushing a healthy firm into insolvency by excessive risk-taking is some snickering at the golf course. In terms of lost monies, it is minimal."
It might be minimal for Wall Street but for millions of people in this country Wall Street gambling was real and we all lost. We are paying a terrible economic price because of irresponsible risk-taking by Wall Street executives. My mortgage is under water like forty-seven percent of Florida mortgage holders, we owe more on our mortgage than their home is worth. This negative equity crisis is a direct result of the massive housing bubble and bust that big Wall Street banks fueled and profited from.
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.
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,
Mrs. Silvia Hall