The Federal Reserve now has in place a policy for supervising executive pay in banks as part of its programme for ensuring the banking system’s safety and soundness. Governments around the world have adopted or are considering regulations concerning pay in financial institutions. I have been an early proponent of such government involvement, advocating it in congressional testimony, in “Regulating Bankers’ Pay,” an article co-authored with Holger Spamann, and in other writings. In contrast to what Mark Calabria argues in his supporting statement for the motion, public officials have good reason to pay close attention to executive pay in banks and to reject assertions that it should be none of the government’s business. (By banks I refer throughout to any financial institutions that are deemed to pose systemic risk and are subject to financial regulation for this reason.)

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