The Little Guy: Collateral Damage
NEW YORK (
)-- Lots of financial regulatory news today, but don't believe the hype.
"Bankers Face Sweeping Curbs on Pay," blasts
The Wall Street Journal
at the top of its front page, but all the story tells us is that the Federal Reserve would have the right to reject any pay policy it doesn't like at one of the institutions it regulates. Ah, the Fed. That institution sure has a reputation for kicking banker's butts!
I can think of at least two good reasons for a newspaper to run screaming headlines about meaningless regulations. First, that's the daily news business: pretending the most important thing that's happened in 10 years happens every day. Second, many of our regulators seem to want to look tough while not doing much. Therefore, any news organization that makes them look tough gets more leaks.
A not-leaked (and potentially more interesting) pay-related development, first reported by
late Thursday, is the news that pay czar Kenneth Feinberg plans to disclose the pay for the 25 highest-paid executives at
Citigroup
(C) - Get Report
,
Bank of America
(BAC) - Get Report
,
AIG
(AIG) - Get Report
,
GMAC
,
General Motors
,
Chrysler
and
Chrysler Financial
.
Things could get especially interesting if Feinberg discloses the names of the highly-paid individuals, but so far I haven't been able to find out if that is part of his plan. I confess to being on the fence myself about whether "naming names" is a good idea. On the one hand, I am worried about mob justice. On the other hand, if you're worried that you're making so much money you don't want people to know about it, maybe you're making too much money. I'm not saying bureaucrats should be determining people's compensation: I'm just saying being embarrassed about the egregious sums of money you make is a nice problem to have.
Next up, a proposal to ban so-called "flash trading." It's on the front of
The New York Times
today, and also in a prominent spot in
The Wall Street Journal
. But as I have yet to read an article that clearly explains what flash trading is, I'm not sure how regulators are going to be able to ban it. Here's my prediction: it gets banned, and is replaced by something nearly identical with a different name.
Last up, the ratings agencies. Now ratings agencies like
Moody's Investors Service
(MCO) - Get Report
and Standard and Poor's, a unit of
The McGraw-Hill Companies
(MHP)
will have to disclose more information that scarcely anyone will pay attention to about the ratings process. Not at all a big deal.
Potentially more significant are measures requiring the big ratings agencies to share information on securities they rate with their smaller competitors. This could be more significant than many people realize, though it will take quite a while to play out.
Still, overall, there appears to be far more flash than substance in the latest regulatory revelations. That's bad news for the little guy, who will pay the price when Wall Street inevitably gets carried away all over again.
--
Written by Dan Freed in New York
.
