By Martha Graybow
WASHINGTON (Reuters) - Wall Street has shown little interest in getting rid of lucrative employee payouts even after the financial industry needed billions in taxpayer bailouts, a leading U.S. Senate Republican said on Monday.
Charles Grassley, of the Senate Finance Committee, said financial industry leaders -- particularly those at companies that have accepted bailout funds -- need to be more in touch with the rest of the country when crafting employee compensation.
He said Wall Street firms' reluctance to change their pay practices is not playing well in his home state of Iowa.
"These guys ought to come to Main Street, Iowa, and see how the real world lives," Grassley, speaking at the Reuters Global Financial Regulation Summit in Washington, said of Wall Street leaders.
Grassley said financial executives may be out of touch because "they have been on Wall Street too long" -- just as congressional politicians are often criticized as being disconnected after having "been in Washington too long."
Lucrative compensation handed out to investment bankers, traders and other employees at troubled financial firms has been under scrutiny, especially for executives at big financial firms getting funds under the government's Troubled Asset Recovery Program. Top executives at financial firms accepting government aid are subject to pay caps.
Wall Street's compensation practices have been blamed for helping foment the financial crisis by richly rewarding employees for delivering short-term results based on excessive risk-taking -- with company performance often deteriorating after those paychecks were cashed.
Over the weekend, the New York Times reported that workers at the largest financial institutions -- employees who are not affected by government-imposed pay limits -- are on track to take home as much money this year as they did before the start of the financial crisis.
The newspaper said six of the biggest banks set aside over $36 billion in the first quarter to pay their employees, based on a review of financial statements. The banks have been able to set aside the money because of the strong start of the year for their profits, the newspaper said.
Other speakers at the Reuters summit also said they were concerned about whether Wall Street's pay practices were changing enough with the times.
"More needs to be done in the compensation area to align risks with the compensation," said Comptroller of the Currency John Dugan.
Elizabeth Warren, chair of the TARP Congressional Oversight Panel, said Wall Street's compensation practices need to change.
"We are in crisis," she said. "Following the same old set of rules that got us here is not going to put us back on the right road."
© Thomson Reuters 2009. All rights reserved.
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