structure is set up so that there is a reward system hopefully a reward performance but there is no downside to that there is no reaction for failure if we look back at the history of our performance we will find that many of these executives were rewarded for driving companies into the ground as we and as the american people observe this it has worked well the states have created our corporate laws the shareholders elect directors and the directors obviously there's been abuses in this area i think we all agree on that night tend to agree that the compensation structure could have some effect on systemic risk but does that mean that the federal government should step in with legislation and try to correct this is giving stockholders and stockholders themselves can be individuals who are not necessarily a emphasize to our states that they need to have good laws with respect to the ability to be able to change directors and i think we need to be very careful in washington we've gone through a bailout situation i don't think anybody looks at watch and think gee these people really know how to run things either to executive branch or at the congressional branch and one reason other people are not being paralyzed because of losses is that we have been willing to step forward with bailouts and i think we need to be very careful about that i don't think that government intervention  is an acceptable and as far as this is concerned so i would encourage all of us to listen carefully because i think there's a good point to be made to think deeply about what we're doing and make sure that we do not upset something which has  to an agency that could put taxpayer money at risk or engage in bailouts it should not be permanent tarp as to tarp it provides for appropriate standards of executive compensation  regret the fact that the administration seems that it will apply this only to those entities that have received three scoops of ice cream i would think that if you read the law it should apply to any company that receives even one infusion of tarp funds  the people of this country were outraged at executive compensation that was not only understandable it was valuable and it will lead promptly to the return of some sixty eight billion dollars to the treasury by various banks that they would not have done if it was not for this outrage and the governmental reaction to it as to the proposals we're considering today is to say on i believe we ought to look at that being binding not just advisory and we ought to set as many of the standards here in this room rather than just transfer authority to the we're talking about shareholder democracy democracy starts by legislating by the elected representatives of people not just granting power to an unelect board there are those that say that that corporate boards will exercise the authority and if they don't there can be shareholder elections the process of picking shareholder boards would make hugo  blush after all corporate funds can be used in unlimited quantities to back one side and to fight the other as to the pernicious incentives i think we're all against them it will be extremely difficult to design a system where an executive compensation reflects whether that executive actually helped the company in the long term rather than simply made it look good in the short term it will be easier for those who have company wide  chairman for your tremendous leadership on the issue of executive compensation and for holding this hearing this issue promises to be one of the most important and upcoming regulatory reform legislation recently there's been a number of interesting characterizations of efforts to reform executive compensation structures on wall street in the wake of the worst economic crisis since the great depression many financial industry leaders have insisted that c e o compensation is self correcting their urgent action on reform insisting that shareholder and media scrutiny has already moderated for leaders of poorly performing companies they claim if we enact stronger reforms our financial talent will be driven overseas and our economic recovery will be delayed what is missing from that argument is clarity and reason for the one hundred seventy five executives who companies helped fuel the current economic crisis that ultimately required hundreds of billions of dollars in taxpayer assistance i believe  capable compensation overseer should have the discretion to determine whether or not these companies compensation packages are reasonable in any other industry when someone takes excessive risks that lead to monumental failures there are repercussions wall street seems to expect a separate set of rules for my constituents this double standard is nothing new they know that thirty years ago took home thirty to forty times what average workers made and now that number has exploded to three hundred forty four times an average worker's pay they know that while the average c e o pay dropped by a million dollars last year many average workers were laid all they know that the average bonus payments to wall street executives represents more than they hope to earn over a lifetime and they know that once again main street is paying for the actions of wall street my hope is that industry leaders understand that calls for executive pay reform are not a retaliation for our current economic reality but rather an attempt to usher in a new era of real corporate responsibility i hope that executives realize that performance incentives that are tied to the long term success and soundness of an institution are essential if we hope to monitor systemic risk and restore confidence in our markets with that in mind i look forward to working with the administration the chairman of my colleagues on this committee thank you mr chairman i yield back the gentleman  but to me as i look at the federal government really is the one that poses the single biggest the senate is really not even close you know part of the reason the government poses such a large hispanic risk is because of the often misguided federal government policies we've seen  government officials with their long term track record of success continue to come forward with proposals that to one degree or another dictate to private firms just about how they should properly compensated decorative and measure performance look there's certainly room for improvement in particular individual companies and putting together compensation practices and to the extent that this question today just as the gentleman from the other side just made a comment just now helps to inform boards as a take a closer look at their compensation policies that could all be a positive development you know i have a problem i believe the american people are growing weary of recent government overreach into the private sector with the government now owning g m and with the way the rule of law was disregarded in the chrysler bankruptcy case dangerous actions are taking place which would create an even playing field and increasingly inject political decisions with so many unintended consequences into our economy so individual boards from companies have sponsibility  compensation packages that not only take into account the long term best interest of a company and its shareholders but also allow them to attract the best available talent this is a fundamental underpinning of our free market economy and it should not be put in the hands of individual accounts or through a mutual fund and as investors have lost trillions in the current stock market decline there is no doubt that one of the causes of the current financial crisis was executive compensation in place and many of the largest financial institutions  the top executives to the traders on the floor people were receiving compensation package that short term gains rather than rewarding long term growth and shareholder wealth i'm happy to bomb a ministration has announced that they are taking steps to address this issue by calling on congress to pass legislation that requires companies to hold an advisory shareholder vote on compensation and mandating corporate boards independent compensation advisers tomorrow i'll be introducing legislation that will do that contributing factor to the excessive risk that was central to the crisis was the prevalence of compensation practices at financial situations that encourage short term gains to be realized with little regard to the potential economic damage such behavior could cause not only to those firms but to the financial system and the economy as a whole down the road compensation structures that permitted other financial institutions to avoid the potential long term downsides of their actions discouraged focus on determining long term risk and underlying economic value while reducing the number of financial market participants who have an incentive to be the important canary in the coal mine i want to make clear and as secretary geithner said yesterday our goal is to help ensure there is a much closer alignment between compensation sound risk management and long term value creation for firms and the economy as a whole our goal is not to have a government micromanaging private sector compensation sector geithner said yesterday we are not capping pay we are not setting forth precise description for all companies compensation which can be counterproductive counterproductive and we come to this with a clear sense of both the seriousness and the humility one must bring  both the importance of the issue but also the care and rigor one must take to ensure that well intentioned actions do not lead to unintended consequences i will mention of just a few of the principles  geitner laid out yesterday a couple of examples and then i look forward to the discussion one compensation should really measure and reward and i think this is an important issue it is it is a lot easier to get everybody to agree that performance pay should be performance related but it is a lot more complex to find out what is that right metrics that ensure that it is true performance simply using stock as they can confuse brains for a bull market and on the other hand not properly reward an executive who may be doing enormously well in a difficult economic time i think one of the things we should study carefully is what is the careful mix of metrics that truly rewards performance in fact and not just in name secondly compensation should be structured in line with time horizon the right time horizons approach a friend of mine said to me recently it is like there is an entire industry which entire sets of financial actors which are able to realize private gains in a single year for risk they are creating are having those not easy for financial actors to simply put off the potential harm they could be leaving to their firm their shareholders and the economy as a whole third compensation practice should be aligned with sound risk management now forty independence of risk managers within firms ensuring they are independent compensated well is most important when you're going through a period of excessive optimism where asset appreciation contemporary may temporarily make the reckless look wise and the prudent look overly risky former federal reserve chairman william martin once said the job of the federal reserve is to take away the punchbowl just when the party starts getting interesting likewise risk managers must have the independence to take the car keys away when they believe a good time may be creating even a small risk of a major financial accident down the road we should examine whether the prevalence of golden parachutes and supplemental retirement packages truly align the interests of executives with shareholders   concerning golden parachutes is more evidence that they are not tied to performance or even mergers and acquisitions and i fear that they lead the under significant move forward in terms of transparency accountability the evidence shows that it has had a positive impact and in terms of the independence of compensation committees i'll just say briefly we start with the same premise have a significant effect on the safety and soundness of banking organizations and on financial stability compensation arrangements which include salary bonuses retention payments and other forms of compensation any type of organization serves several important the objectives for example they are important for attracting skilled staff promoting better firm and employee promoting employee retention providing retirement security to employees and allowing the firm's cost base to move along with its revenue it is clear however that compensation arrangements can also provide executives and employees with incentives to take excessive risks that are not consistent with the long term health of the organization this misalignment of incentives can occur at all levels of a firm and is not limited to senior executives in addition built on producing sizable amounts of short term revenue or profit can encourage employees to take substantial short or long term risks beyond the ability of the firm to manage just so the employees can increase their own compensation risk management control framework have proved the loan of acting as a brake on excessive risk taking were compensation programs have created overly strong incentives to these and other weaknesses in the ways that firms of thought about and implemented compensation programs have become apparent during this period of economic stress as a result many financial firms are now reexamining their compensation structures to better align the interests of managers and other employees with the long term health of the firm the federal reserve is also actively working to incorporate the lessons learned from recent experience into our supervisory activities the federal reserve played a key role in the development of the principles for sound compensation practices issued by the multinational financial stability board in april two thousand and nine in addition we are in the process of developing our own enhanced guidance on compensation practices a guidance we are drawing on expertise within the federal reserve as well as on research from the broader academic community in other compensation and industry experts our investigations suggest that there are certain principles that should guide efforts to better align compensation practices with the safety and soundness of financial institutions first to be effective compensation practices must be properly aligned throughout a financial this includes careful review and construction of compensation programs at the level of middle management traders and other individuals who can alter the risk profile of the firm firm's boards of directors and supervisors must broaden the scope of their review of compensation practices beyond the traditional focus of senior executives second compensation practices must take account of the risks of the activities and transactions conducted by the firm simply based on targets for short term profits revenues or volume substantial financial rewards for meeting or exceeding volume revenue or other performance targets without due regard for the risk of the activity can create incentives to take unsound risk moreover incentives that reward good performance but the do not adjust compensation downward when risks are increased or performance targets are missed are not effective in limiting risk third more can and should be done to improve risk management in corporate governance as it relates to compensation practices this will involve more active engagement by boards of directors and risk management functions in the design and implementation of compensation arrangements firm wide improvements in compensation practices are likely to be harder to make and take longer than anyone would like one size will not fit all however well crafted may morning chairman frank ranking member baucus and the other members of the committee i'm pleased to be with you here today to testify on behalf of the securities and exchange commission so that i may share with your thoughts on the topic of executive compensation as an initial matter i think it's important to note that as the landscape of compensation practices continues to change the commission is committed to keeping to disclose a rules we administer up to date so that investors have the information they need to make informed investment in voting decisions as we all know in recent years the issue of executive compensation has gone it's significant public attention as revelations about executive compensation come to light claims have been made that bonuses and severance packages at some companies have been exorbitant indeed executive compensation has a lightning rod by the recent financial crisis and concerns about the accountability and responsiveness of some boards of directors to the interests of the shareholders we believe that in order for public markets to function properly it is crucial that shareholders the owners of the company be able to make informed decisions about their investments and that shareholders can hold the members of the board of directors accountable for their decisions not withstanding the commission's current rules we recognize that there is an ongoing vigorous debate between those who believe that there should be more substance constraints on pay and those who believe the federal government should never or rarely set paper on matters it is important to note however that this debate significantly more meaningful as a result of our disclosure rules however the challenge the commission has executive compensation disclosure rules is that compensation practices are not static as a consequence the commission has revised the schools or rules as necessary to keep pace with new developments in compensation practices most recently in the in two thousand and six the commission adopted a comprehensive package of amendments to its rules that was intended to significantly improve the existing regime of executive and director compensation disclosure while the adoption of the two thousand and six rule or vision significantly expanded the extent and this and strengthen the caliber of compensation this closure the commission is once again considering further possible enhancements it has been suggested that some company executive compensation is has become disconnected from long term company before mn because of the interests of management in the in the form of incentive compensation arrangements and the interests of shareholders are not sufficiently aligned critics have complained that in some cases the incentive structure created by executive compensation may have driven management to make decisions that significantly and inappropriately increase company risk without can measure risk to management's compensation should decision prove costly to the company indeed one of the many contributing factors cited as a basis for the current market turmoil is the misalignment at a number of large financial institutions of management's financial interest with those shareholders compensation policies and incentive arrangements represent just one of the issues that the co plan to take up next month when it considers a broad package of proxy disclosure unhandsome and many of these enhanced myths are designed to provide gerald's with additional information about their company's key policies procedures and practices for example the commission plans to consider whether greater disclosure is needed about how a company and the company's board in particular manages risks including the cons including within the context of existing compensation plans and setting compensation levels the commission also plans to consider whether greater disclosure is needed about a company's overall compensation approach in particular as it relates to the company's risk management and risk taking beyond decisions with respect only to the highest paid executive officers the commission for the plan to consider proposing new disclosure requirements regarding compensation consultant conflicts of interest in addition to these executive compensation this closure and hansen that the commission plans to consider proposals related to the directors themselves for example it plans to consider whether to enhance disclosure of director nominee experience qualifications and skills so that shareholders can make more informed voting decisions the commission for the plans to consider proposed disclosures to shareholder shareholders about why a board has chosen its particular leadership structure such as whether that structure includes an independent chair or perhaps combines both the c e o and the chair in one position again so that your oldest can better evaluate the board when making a voting decision notwithstanding the commission's executive compensation disclosure requirements however it  been argued that absent a more effective way for shareholders to exercise their fundamental right to nominate and elect directors to the company's board of directors board accountability to shareholders cannot be maximized accordingly on may twentieth the commission voted to approve or notice comment proposals that would give shareholders a more effective way to exercise their state law write to nominate directors under the proposal shareholders who otherwise have the right to nominate directors at a shareholder meeting would subject to certain conditions be able related to the nomination process in the process materials provided that certain other requirements of the will and that if adopted we believe these new rules would afford shareholder shareholders a stronger voice in determining who oversees management of the company that they on thank you again for inviting me here before you today on behalf of the agency we look forward to working with congress and with this committee going forward on these issues i'll be happy to answer any questions thank you before i get a question that you want to comment on some of what we've heard earlier from my republican colleagues i think that you mention but as far as i know i can say for certain with certainty that there is nobody in the obama administration who is proposing such things what we're proposing in the legislation we put forward yesterday is greater transparency and accountability to the owners of the company we find and i think practices shown that sunshine and transparency does have a powerful deterrent effect on improper or ill we have holders in the public the compensation committees are independent and yet we know that if the company itself hires the compensation consultant if that compensation consultant can also dealing with compensation and bonuses etc there are some things that we have learned about actions that were taken that are very disturbing and  i don't know that we have gotten any information to help us understand what went on in some of the actions for example i want to know what you have discovered starting with gone out to the public between former secretary paulson the chairman and the chairman of bank of america over what transpired at during that transaction which you know was months before  i would have to i need to go back and would be happy to do so to get what our administration's best understanding is of that of that dispute but it is an ongoing dispute with i believe our own justice department obviously the legislation passed would have limited those type of bonuses to one third of overall salary so in the in the case of somebody receiving tarp recipient had been a tarp recipients at that point it would not and we feel very much that these type of practices when brought to light that the transparency is often decisive and so when people say for example say on pay as non binding i don't think that's the way it works in fact i think that it is very very troubling for a company to face a negative vote in those areas and that this you want to take that type of public rest any other comments on good to put this on the agenda and the same reason that you hear mr alvarez talking about it from the federal reserve we have all learned painfully the compensation is closely related to the safety and against type of excessive risk taking that we've seen which too often can get a pass in exactly a bubble atmosphere where everybody looks smart because assets are all going up year after year business to be part of that process so that we are reviewing not just what may be going wrong but also best practices and i think one of the positive things that's coming out of this discussion and we heard in the meeting that we did which was a very wide thank you mr chairman and i thank all of the panelists would like to know from my colleagues that i have worked closely with feinberg during the recovery for nine eleven for new york city he took on an incredibly difficult task determining what the compensation would be for families that had lost their loved ones it's a very difficult task and he won applause from everyone he did a magnificent success successful as he was with the nine eleven compensation fund my question really to treasury is how did you determine the seven companies that are going to have their compensation determined or guidelines mentions the specific names of programs but i think your question more goes to what's the logic and rationale and i think our feeling is that some of the things we've done some of the facilities that were set up are set up  generally accessible to companies financial institutions at large and they are often set up because we think that there is a positive purpose in them participating we think so those are generally accessible programs where a company comes to the u s government the u s taxpayer and requires exceptional assistance that is not being offered to their peers because they face an enormous threat to their fundamental financial stability that we find to have such an impact on the economy that we have to intervene that is an exceptional case and that  of principles on performance but also likely to lead taxpayers to get return on their dollar that that extra level of protection for the taxpayer was necessary and important there in the way it would not well i think everyone understands that if you take taxpayer money you are subject to a higher form of oversight and accountability but the question basically that  than some of the so called executives who are looking for immediate compensation other words they're trying to get in and out in a relatively brief period of time are we really serving the public by making these changes and i realize if you go through each corporation would be different but is there a general sense of who the shareholders are in corporations in america today that's been well analyzed i will let my colleague from the c answer all the only thing i would just say that goes to your point which is that we do have to be very careful in a one size fits all metric for rewarding behavior and i think some of the some of the experts that you're going to hear in the next panel are very persuasive in making that case that simply using stock wow often successful is not foolproof and i think it's something we should  all be studying very carefully and listening to the type of people you have coming up in the next panel but thank you thank you congressman i appreciate the question and have the opportunity to answer it i don't know that i have a full some answer a complete answer for you which i'd be happy to i would expect to do  and i'll be happy to work with you to get that but the issue that you bring up is one that we absolutely have considered in and in most of the rule making matter that i've been involved in the interest of shareholders long term short term percentage ownership small companies orses large cap companies are all or many of the issues that we think about when adopting rules it is certainly something that we see common on we are rules and we have been thinking about economic interest in voting interest in and going forward so  i'm aware of those issues and we are aware of those issues we think about those issues i don't again know i have a full answer to tell you if i can give the responses to i can i tell you the makeup of the american shareholders but those particular interests are definitely raised with the commission and it's something that we think long and hard about before we double good but i think it's important we need to keep an eye on it my next question is sort of general and it goes back to what i said at the beginning and that is you know what should we in the federal government be doing versus what the states are i'm not sure that the federal government should be stepping in and doing this and of my concern is if we do this or we can be expected to take whatever the next step is or whatever it may be are we better off discerning exactly what the problem is and then allowing the states to make whatever the decision is are level i'm not sure that the commission itself has weighed in on that particular issue but i think if you go back and look at the provisions that were adopted as our brains oxley the provisions of the rules the commission has adopted we have gone to great lengths to maintain that balance between you know the interest of the f c c the authority that the congress has given to the f c c to protect investors versus the very important state law rights that all shareholders have think you'll see that in many of the rule making that the commission has gone to that there is a balance that's it's a policy question i'm sure that you need to answer which is why you're asking me the question i don't know but i can tell you i do think it's important to state federal rights are recognized throughout the rules that the commission has and the authority that the congress has given to the commission so the question i don't have time to let me just let me just say this i understand what you're saying but i think we need to be very careful about how encroaching we are being with respect to dictating in terms of corporate structures  mr chairman and apologize to the witnesses for not being able to be here for their testimony but i have been reviewing and i want to take  take way in which mr sperling addressed these issues differently and ask a broader question the first three principles  that you outlined in your testimony the compensation plan should properly measure and reward performance compensation should be structured in line with the time executive and shareholders and number five we should promote transparency and accountability and compensation my underlying question is who is  supplemental retirement packages we were not coming in with a particular legislative or even regulatory proposal we really were in a sense trying to shine a spotlight on a practice that coming to the table with a specific proposal and it was a proposal to essentially give the authority need to do two things that we the treasury department and the both feel are in the you lay out compensation plan should probably measure reward performance structured in line with time horizons of risk to be aligned with risk management and the rest  most of my life i have signed the back of a paycheck but there was a time i actually saw on the front of a page that there was a time i served on the compensation committee of the new york stock exchange company and not unlike the  gentleman from california opening statement i thought i worked very hard to try to ensure that these principles were put into place i remember a pretty unhappy c e o when i was part of a committee informing him he would not be getting the pay package compensation structure that he had desired i guess my question for you is i've found this challenging and i was in the private sector for twelve years i've been a member of congress for six and a half when i came to congress i didn't have any kind of a peson now i know what the perfect compensation structure is i go back to what the gentleman from california said and why can you do better compensation consultant if you if there was not an ability for the compensation have a conflict of interest because they were paid by the c e o and some other measure that would strengthen your hand responsibilities of committees of public companies i have an open mind about that i can tell you from my experience on this committee that there been many witnesses from private enterprise sitting at that table who have received strong suggestions from this committee that this is a way that you might want to do something because if you don't do something we will do it for you so i'm somewhat fearful that once we go down this road we may go way beyond merely strengthening the end of compensation committees also early on pay for your testimony you state quote when workers who are losing their jobs see the top executives of firms walking away severance packages it creates the tarp related question the administration put forth a reorganization or under that plan g m bondholders many of whom are middle income americans including seven billion dollars in coins warrants for an additional fifty percent of the united auto workers gets seventeen and a half percent of the company or less in claims twenty billion and ten billion in cash six and a half billion in preferred stock two and a half million iou and warrants for an additional two and a half percent of the company that not create an impression of a double standard i really don't believe i really believe that the bondholders very representative themselves very well i think they were better off than had they allowed for a completely uncontrolled bankruptcy i really do believe there was very careful shared sacrifice and in their range thank you thank you commenting on the left gentleman's comments on not sure that the bond holders were hurt rather a huge infusion of taxpayer money helped all the old stakeholders i think we were more generous with the workers than we were with the bondholders but if anybody is not being treated well and this is the taxpayers i wan i want to join the chairman in welcoming republicans when they reject virtually every bush administration economic policy of the last seven months of his administration but i think it's now time for democrats to limits on executive compensation i would say that tarp is an extraordinary departure from free enterprise and that even those who only got one infusion of say twenty five billion dollars of capital should be viewed as getting extraordinary extraordinary help i have one question for the record because i'd like all three of you to answer it it's way too complicated to do so orally and that is i want you to imagine how we would design a executive compensation system for the realized that that unit could bring down that enormous company likewise keep in mind at least for this example assume that this unit profits for accounting purposes for five or ten years in a row before it imploded and now try to figure out what kind of executive compensation system would reward the people in that unit for taking the right kinds of risks but would actually penalize  them for taking the wrong kinds of risks now for a question for our representatives from the there were elections in venezuela to control the government of venezuela our state department criticized to go chavez for using the resources of the government to affect the outcome of the election for representatives to control the government so what can you do to propose to congress or to your own board for regulatory changes rules that would prevent corporate management from using the resources of the company to unduly influence the outcome of the election without giving similar resources to the other side what would you say to certain challenger that exact issue was the point that the commission took up on may twentieth and as you may know this is the third attempt at the commission is made to give shareholders who have a state law right to nominate directors the ability to have those nominees included within the company's proxy materials so that the issue about disclosure and the ability to provide disclosure about their nominees or is all included in that and that rule proposal is up on the commission's website as of as of last i would hope that you would propose legislation that go would go far beyond the proxy statement trust me it's a very boring document which is needed is equal amounts of in some cases millions of dollars to call shareholders and try to get their proxies and that contest needs to be equal i guess my  time thank you mr garrett i think the chair and before i go to my questions about the opening of the meeting where the chairman was talking about history and how history is relevant indeed it is more the pity that revisionist history is not house and you remember the chairman actually carry the war for the past administration to make sure that that legislation was not only engaged in but made sure that legislation the tarp legislation actually passed and also we must remember that history tells us that this new administration has basically adopted hook line and sinker the past administrations of the bailout philosophy so yes there are a number on this side of the aisle that repudiate in the past and i look to the other side of the aisle there is maybe one that i see over there that joined with us in that fight against the the tarp bailouts and all the string of bailouts that followed so let's remember what history was and also see that we have a counselor to the treasury secretary here with us today remember also that mr geithner that time was administration is continuing on in the mold and continues on with the bailout and that's why the number of us thought was wrong then continues to fight out against now with our legislation and what we'll roll out later on history now clarified mr  z in your testimony you say that employers are out of firm a significant risk and importantly properly designed compensation programs may incite a wide range of employee behavior you also say we should adjust compensation so that employers bear some of the risk associated with their activities an employee is less likely to take an imprudent risk of incentive payments are reduced or eliminated ends up imposing higher than expected losses how does the fed right now with the activities of the employees that have a risk not only on themselves but the entire economy well there is a performance at the federal reserve there is a tie between performance and we are all rated performance we all have adjustments to our paid based on on our performance we aren't proposal would have a higher cost for businesses operate most would agree with that some would argue that larger corporations could probably bear that cost others or argue that that may be the case but smaller firms would have a difficulty dealing with those pretty significant additional expenses does anyone have a comment on how smaller firms would have to deal with the cost of the operations so i would say that smaller firms actually do a better job of aligning risk and reward than the larger firms do in part because typically in a smaller firm the c e o with there is one knows the employer knows the risks that are coming on to the balance sheet before we learned of the hundred sixty five million dollars in bonuses in march we also learn from new york in january that wall street executives were paid eight point four billion dollars in bonuses last year i was troubled by this news especially during a national emergency when the federal government is providing billions of dollars of the financial sector now under normal circumstances i don't believe and i think most of the american people believe that we should congress should be involved in transactions where you were paid for the vaal by the volume of what you did and then you either externalized it to the firm or you kind of the next and of course what happens is that when you're in kind of a incredibly high compensation when it was clear the ship was on the rocks when it was going down how did the compensation laws that we have now if they do fact it's a it's a new york stock exchange listing company requirement that today compensation committee members have to be independent and those rules are quite extensive i think what you're hearing from my colleagues on the recommendations that were made yesterday was to increase the independence of the members of the competition committee beyond what they currently are today to restrict all sort of connections between compensation committee members and the board so i think we're looking about heightened compensation but but there is an independent requirement today and there is quite about disclosure why do you think they would pay out such incredibly high bonuses when they see the ships on the rocks i think one reason what we call a collective action problem no one wanted to be the first to rationalize bonuses for fear that they would lose their best talent that's actually one of the reasons i think we as supervisors can be helpful here creasing the priority of the board of directors and the management to pay attention to the incentives and compensation helping to outline best practices and good principles we can push the whole industry to act together and nobody's done anything about it and quite frankly i doubt that you'll be able to regulate people into into doing the right thing like that i think holding them more accountable individually and personally liable in accountable would just make a little bit more because of their importance to the overall financial economy because our desire to not let something like lehman brothers again happen we make an exceptional effort we make an exceptional assistance that they get that is not available to their peers and it's not based on a general goal it is based on an exceptional intervention and essentially in their fundamental financial stability that is a very different situation and while