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Bloomberg

Wall Street Bonuses at Risk Amid New Clamor to Finish Dodd-Frank

(Bloomberg) — Titans of finance, already threatened by President Joe Biden’s push for the biggest tax hike on wealthy Americans in decades, face another peril: Progressives are demanding action on a long-stalled requirement that Washington clamp down on Wall Street bonuses.Behind the scenes, consumer groups such as Public Citizen and Better Markets are reminding administration officials that the never-finished pay constraints are mandatory under the Dodd-Frank Act. Democrats — upset that the rules languished when Donald Trump occupied the White House — are also exerting pressure, arguing that years after the 2008 financial crisis, banks’ compensation practices continue to incentivize dangerous behavior.The limits are “critical to reining in the reckless Wall Street culture that encourages executives to juice their pay with risky, short-term gains,” Massachusetts Senator Elizabeth Warren, a well-known critic of lavish bonuses, said in a statement. “It’s long past time regulators revisit the rule and use it to prevent greedy executives from crashing our economy again.”The pay strictures are among Dodd-Frank’s most controversial provisions, with watchdogs putting them off even during the Obama administration — a time when the government was eager to tighten Wall Street’s leash.Regulators had been hesitant to insert themselves into how private companies reward employees. Also, because the economy can’t function if bankers completely shelve their animal spirits, it proved difficult to strike the right balance between allowing some risk but not too much. And considering how important annual bonuses are to financial executives, lobbying over the issue has been intense going back a decade.‘Never Finalized’“It’s revealing that of the hundreds of rules in Dodd-Frank, this is one of the few that’s never been finalized,” said Bartlett Naylor, a financial-policy advocate at Public Citizen. Naylor said his group has met with Biden administration officials who gave the impression that “they don’t want to let four years pass and not get this done.”“People can be highly confident” that Biden’s financial watchdogs will implement the regulations, said Dennis Kelleher, the president of Better Markets, which advocates for aggressive oversight of banks and other firms.White House officials declined to comment.Unlike the plan Biden released this week that would fund social programs by raising taxes for the rich, the rules targeting Wall Street bonuses won’t have to go through Congress, where major policy changes are challenged by Democrats’ razor-thin Senate majority. With progressives like Warren and New York Representative Alexandria Ocasio-Cortez feeling emboldened by Biden’s victory, the Federal Reserve, Securities and Exchange Commission and other agencies will probably be urged by Capitol Hill to pass regulations with…

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