The Advisors' Blog

– Broc Romanek, CompensationStandards.com

As Mike Melbinger detailed in his blog yesterday, the FDIC and the Obama Administration have combined for a historic one-two punch that would have made Muhammad Ali blink to batter financial institutions doing business in the US. Here are Paul Hodgson’s thoughts on the FDIC’s actions.

But it’s not just the government acting against banks. As noted in this BusinessWeek article, Goldman Sachs has been sued by a shareholder – in Ken Brown v. Goldman Sachs, NY Supreme Ct (1/5/10) – over its bonus payouts. The bottom line is that citizens all over this country are extremely mad that things are tough for them but rosy for bailed out banks – and until boards and senior managers understand this, the consequences will continue to get worse. Just adopting a plan to give a percentage of earnings to charity won’t dent this anger.

I’m firmly in the camp that many of these regulatory responses don’t make sense – or may even make things worse. And I also have blogged that problems with executive pay practices are a different animal than issues related to paying bankers generally. But boards and senior managers of Wall Street firms need to understand the circumstances that they are living in. I still think they don’t “get it” – and it reminds me of Gilbert Arenas spending the day with enforcement authorities and the NBA and then later that night, playfully pretending to shoot his teammates. Gil was just fooling – but most basketball fans didn’t see it that way…