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Regulators Seek To Limit Bonuses For Risk Taking At Big Banks 

May 19, 2016

Mark Melin, ValueWalk

Can regulators curb excessive risk taking at firms who put the economy in jeopardy by limiting their executive bonuses?

One primary criticism of executives at financial institutions that received a government bailout in 2008 is that they were blinded by greed. In a free market, if individuals decide to take significant risks with their own funds, that is their business. But in a world where systematically significant banks are gambling with the world economy and public funds are involved in significant risk taking, is the responsibility different? With government bailout funds in mind, six federal agencies are seeking public comment on eliminating incentive bonuses for too big to fail executives.

Dodd-Frank law is the impetus for limiting incentive for excessive risk taking with public funds

In the aftermath of the 2008 government bailout, an issue that still burns is that those who took significant risks, and some say broke laws, nonetheless kept their bonuses.

“There is evidence that flawed incentive-based compensation packages in the financial industry were one of the contributing factors in the financial crisis that began in 2007,” a joint government press release said. Read more

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