Will changing the structure of executive compensation change Wall Street?
Risky deals drove Wall Street to the bank with record profits and then to the brink with astounding losses. Even still, it is hard to curb risky behavior. Risky deals have the highest potential payoffs. The flip side is they also have the highest potential losses.
According to the Associated Press, today the Federal Reserve released details of its plan to monitor bank pay. The plan would not involve setting executive compensation.
The Fed would instead review pay policies and exercise its power to veto policies that ”encourage excessive risk-taking.”
The logic is that executives, loan officers and traders will be discouraged from behaving badly since their pockets won’t …read more

Even though the recession is most likely over, the economy has certainly not become healthy again due to huge unemployment figures, weak consumer spending, and a variety of other economic issues. However, one potential problem that many analysts have begun pointing to is the risk of inflation, a risk that has Federal Reserve officials split concerning whether or not inflation could become a serious problem.
Fed officials voiced their opinions on the risk of inflation during the September 22-23 Federal Open Market Committee Meeting, the minutes for which were released today. A big question that arose during the meeting concerned whether …read more

The president of the Federal Reserve Bank of St. Louis, James Bullard, recently said that he expects unemployment to head unavoidably into double digits and that inflation poses a larger risk than many analysts believe in the medium term. At a time when many Americans are looking for good news related to the economy, Bullard’s statements sadly come as no surprise.
Data released earlier this month confirmed that unemploymet has reached a 26-year-high of 9.8 percent, a staggering figure that has far-reaching rammifications on the economy and on the life of the average American. Bullard’s prediction that unemployment will continue to soar …read more

The Fed will need to move quickly when the time is right according to Richard Fisher, president of the Federal Reserve Bank of Dallas.
Fisher’s comments threw some people off since the Fed just opted to leave rates unchanged, and promised to keep them their for a while.
But, Mr. Fisher didn’t say now was the time to raise rates, he said (in a nutshell) that once convincing signals of a recovery came about then it would be time to act quickly regarding rates.
Is the market ready for a Fed rate increase?
Perhaps it is time for interest rates to rise. After all, the impact of …read more

Following the recent lawsuit filed against BBVA Compass Bank and general concern surrounding deceptive bank practices involving overdraft fees, the Federal Deposit Insurance Corporation has called for tight restrictions on fees charged for overdrawn checking accounts. Separately, many of the nation’s largest banks have already announced their plans to revisit overdraft policies.
However, FDIC Chair Sheila Blair has raised the concern that banks may not be going far enough in their restrictions of these fees. She has called on the Federal Reserve to finalize the rulemaking portion of the overdraft reform, but the Federal Reserve maintains that it is still unsure …read more

There have been many reports indicating various signs of economic recovery that have turned out to be less than definitive, but it seems that everyone has faith in the economy as of late. The Federal Reserve is the latest entity to express its optimism for the economy, releasing a positive assessment of the situation that has rallied investor confidence.
In its statement, the Fed also revealed that it would slow the purchase of mortgage debt in order to keep the program alive until next March, a sign that the sense of urgency on the part of the Fed to take action …read more

As most people are already aware, the financial crisis has been largely blamed on excessive risks taken on the part of financial systems that aimed to bring in huge paydays for bank employees. Now, though, the Federal Reserve plans to implement several rules that will change how banks pay their employees in order to avoid dangerous risk-taking.
 
The government has faced enormous pressure from both the outraged public and from other countries, such as France and Germany, to curb these harmful practices. In response to these desires, the Fed has finally rolled out a series of guidelines that will come into …read more

Reports of a quicker global economic recovery recently began to turn investors away from the dollar and toward other riskier assets, such as stocks, or toward safer investments, such as gold. However, new reports have refuted the idea that the global economic recovery will come swiftly, setting the stage for the dollar’s rebound as an investor’s safe haven.
 
Plenty of important financial events will occur next week, such as a Federal Reserve monetary policy meeting, the release of U.S. housing data, and a Group of 20 gathering. These events may compound the evidence required for investors to begin to take stock …read more

The Treasury Department has decided to move a significant amount of funds from the Federal Reserve to other locations throughout the duration of the financial crisis. This move allows the Federal Reserve to freely loan funds to the market without having to impact the federal funds rate, which has important significance to banks and other lenders.
 
Right now, Treasury holds $200 billion in a Supplementary Financing Account with the Fed, but it plans to cut that amount to $15 billion over time. Analysts think that this move comes as part of the Treasury’s attempt to avoid hitting the federal debt ceiling, …read more

Many investors were waiting for the Federal Reserve to weigh in on the current economic climate of the United States. After the Federal Reserve said that the nation’s economy is leveling out, that news was good enough to cause stocks to jump on Wednesday.
While the Federal Reserve “leveling out” comment doesn’t sound like high praise, it was actually about as good as could have been expecting. Many market experts thought that it was possible that the Federal Reserve could still say the U.S. is still looking for the bottom of the current economic hardship.
The major stock indexes were up between …read more