NEW YORK (

TheStreet

) --Bank boards didn't do their jobs, so the

Federal Reserve is preparing to do it for them

-- at least when it comes to compensation and bonuses.

Fed

Chairman Ben Bernanke is not asking for permission, either. He's exercising the Fed's existing powers to regulate banks and doing this in-house.

The new rules -- requiring pay plans to be approved by the Fed to make sure they don't encourage excessive risk taking - could be completed in a few weeks and only need to be approved by the central bank's board, according to the

Wall Street Journal

.

I feel a double dose of outrage as I ponder this unilateral move by the Fed.

First, shame on the banking boards for making this necessary by abdicating their responsibility to their companies, shareholders and taxpayers and letting things get so out of control that a government bailout became necessary and new rules became the order of the day.

Second, I'm flabbergasted that it is apparently so easy for the central bank to do and yet the Fed never intervened before the entire system blew up.

Bernanke is clearly doing things differently than his predecessor Alan Greenspan. There's a new sheriff in town.

Clearly this move will rankle many Congressional leaders, who may think the Fed is overstepping its bounds. But applaud Ben Bernanke and his team for taking action while lawmakers jawbone and pose for the cameras without getting anything done.

I'm sure there will be a flurry of behind-the-scenes activity as the leaders of our major financial institutions try to stoke regulatory turf wars and political infighting in the hopes of creating a stalemate the preserves the status quo. We've seen how much

Bank of America

(BAC) - Get Report

,

Goldman Sachs

(GS) - Get Report

,

Citigroup

(C) - Get Report

,

AIG

(AIG) - Get Report

and the other big financials cling to their incentive-based pay structure.

The Fed must stand its ground on this one and President Obama should back up Bernanke. Lawmaking won't get the job done because bankers are too smart to by stymied by legislation. There's always a loophole to be found. If they can't incentivize their rainmakers one way, surely they'll find another way.

It's a different story if the scrutiny comes from the Fed, which has more flexibility in adapting its rules and is finally showing a willingness to do so.

--Written by Glenn Hall in New York.

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Glenn Hall is the New York-based Editor in Chief of

TheStreet.com

. Pursuant to TheStreet's editorial policy, Hall does not hold positions in any individual stocks.