Pay Restrictions May Not Fix Underlying Risk-Taking

03/18/2010 05:12 am ET | Updated May 25, 2011
  • Steven Pearlstein Washington Post

With financial markets booming even as Main Street is still largely mired in recession, policymakers in Washington on Thursday were scrambling to contain growing populist anger by proposing new rules to curb runaway pay on Wall Street.

Treasury pay czar Ken Feinberg ordered big cuts in base salaries and perks at General Motors, Citigroup and a handful of other firms that were kept alive only through the government's extraordinary intervention. More significantly, the Federal Reserve proposed a set of broad new regulations to reduce the kind of reckless risk-taking at regulated banks caused by "heads-I-win, tails-you-lose" compensation schemes.

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