alvarez and mr. sperling, why do think they would pay out some incredibly high bonuses when they see the ship is on the rocks quacks. >> i think one reason is what we call collective action problem. no one wanted to be the first to rationalize bonuses for fear that they would lose their best talent. that is actually one of the reasons i think we as supervisors can be helpful here by increasing the priority in of the board of directors and management to pay attention to the incentives and compensation, helping to outline best practices and good principles. we can push the whole industry to act together and in that way there is a little bit of safety. then there is less concern that an institution that does make the proper adjustments does for example of a boy bonuses when performance is for won't be left as the only one doing at. and that will improve the practices of everyone. >> do think it would make any sense just to impute some accountability to stockholders and their losses if you act poor like

alvarez, any comments? >> the only thing i would get to that is the industry realizes there was systemic risk and risk to the health of the firms to the compensation packages of the past. if you recall 15 or 20 years ago there was quite an effort to just get paid tied to performance as a beginning spot, so the methods that were used to tie pay to performance have shown in this crisis to have flaws to it. i think everyone is recognizing that so it is an opportunity, we have an opportunity now to make some strides to improve the health of the system and firms individually. >> thank you and i think my time is up to the so i yield back. >> the gentleman from florida. >> thank you mr. chairman. i am still trying to figure out what would make some of the compensation boards or committees recommend the incredibly high compensation that they did, when it was clear the ship was on the rocks and it was going down. how did the compensation laws that we have no, if they do, how did they affect guess between safe nco of

to the pirates because ackley is a better hitter than alvarez in terms of pure bat, ackley has morenk than alvarez, who has much better power, but the question was could he make a lot of contact. >> ackley leaves north carolina after three years. donovan tate was scheduled to go to north carolina for next three years, and he's picked number three by the padres some carolina probably loses the present and the future in the second and third picks of the draft. tony sanchez a reach pick by the pirates for signability. a catcher out of boston college goes number four. interesting after that. the first high school to go by the orioles. pick a name out of here, five, six, seven or eight, that you can see being a bona fide player in the major leagues. >> i love zack wheeler. i love a couple guys on this list, but zack wheeler, right-hander, a swerve, it's usually a negative thing. he has a sharp pitch, good depth and angle on it, really good delivery. i like the athleticism, like the body. he projects as a number two, maybe a chance to be a number-one starter. >> how about signability? >>

alvarez would it be fair for me to get $10,000? >> i couldn't say. >> i couldn't say. >> the answer here is you all are going to accept compensations for companies it you don't know what inadequate compensation for a return is and that is the problem. >> just to reassure people, the house is in recess so we are not going to have to disrupt this. the gentleman from new york. >> thank you mr. chairman and i thank all of the panelist. i would like to know from my colleagues that i have worked closely with kenneth feinberg during the recovery for 9/11 for new york city. he took on an incredibly difficult task, determining what the compensation would be for families that have lost their loved ones. it was a very difficult task and he won applause from everyone. he did a magnificent job with a very difficult, mirky, confusing problem, so i complement the treasury department on their selection and i wish him great success and that he will be as successful as he was with the 9/11 compensation fund. my question really to treasury is how did

alvarez? >> ibm. >> what he do something like this, make this kind of statement that could cause these kind of problems without your authority? >> i didn't have any knowledge of this particular exchange, and again, the rationale as understand now having discussed with him is the agencies that were relevant to our transaction were the fdic, occ and treasury. that's the ones we kept closest and communication. [inaudible] >> the gentleman's time is expired. mr. foster from illinois? >> thank you for empirical letcher and bernanke. i appreciate -- the microphone, is this working? >> see if your microphone is on. >> is this working? i will speak loudly. for clarity at any point in these negotiations did you or anyone you know what point out to mr. lewis the government agencies have the power to remove him and or the bank of america board? >> i did not. >> okay. now, without any specific reference to the case at hand, you believe there are circumstances in which the ceo of a system ackley important

alvarez. >> thank you for the opportunity to offer the federal reserve's. compensation practices and financial firms and other business organizations can have a significant effect on the safety and soundness of banking organizations and on financial stability. compensation of arrangements which include a salary, bonuses, retention bonuses and other forms of compensation and any type of organization serves several important and worthy objectives. for example they are important for attracting skilled staff, promoting better firm and a employee performance, promoting employee retention, providing retirement security to employees and allowing the firm's cost base to move along with its revenues. it is clear however that compensation arrangements can also provide executive stanton police with incentives to take excessive risks that are not consistent with long-term health of the organization. this misalignment of incentives can occur at all levels of the firm and is not limited to senior executives. in addition, incentives built on producing sizable amounts of s

alvarez talking about it from the federal reserve's perspective that we have all learned painfully that compensation is closely related to the safety and sound obligation, not only the federal reserve but all of us have and i think we also are aware that one also has to be worried about fighting yesterday's war. new practices, the new trends can emerge and they think to ask the major supervisors in the u.s. government to take a yearly look for an annual review of what those trends are could be again, one more check against the type of excessive risk-taking that we have seen, which often can get a pass and exactly a bubble atmosphere, where again everybody looks smart because assets are all going up year after year. these are exactly the times when you need to have more risk management in place and perhaps that the federal level as well. one of the things secretary geithner did was actually to invite many of the major organizations, nonprofits, business groups to be part of that process so we are reviewing not just what may be going wrong but also best practices and one of the positive t

alvarez about the fact that they have gotten the message. in fact, we see is that we have particular concerns about efforts to circumvent even the preliminary constraints already imposed. executives will always be more motivated and agile than regulators and legislators. with regard to pay structures, i support indexed options, with regards to board of directors it's very important that they have the vulnerability to remind them who they represent, that they can be removed if they don't represent shareholders. and with shareholders i really want to focus on the collective choice problem, was called on by economist rational apathy and suggest possibly the appointment of independent voting fiduciary. finally the billions lost in the financial market meltdown are dwarfed by the loss of reputation and brand of american financial market. i am a passionatpassionate capless myself i hope that this committee will work to restore the credibility of our system of capitalism by removing obstacles to the role of the market in establishing optical conver

chairman, to scott alvarez. "i had a good conversation with louis. he confirms his willingness to drop their opposition to the deal going forward and to work with the government to develop whatever support package might be needed for a january 20. we discussed the common equity issue. we agreed that having a significant amount of top capital in the form of common equity was not an ideal solution, given the ownership duplications, but we agreed both to about possible solutions, a government backstop of capital raised, with limited control rights." it sounds to me like ken lewis is concerned about his job. for the american taxpayer to get the voting rights in return for their top moarp money, mr. lewis would be gone. is that the concern mr. lewis expressed about the tarp being presented with voting rights to taxpayers in that deal? >> i don't know what his concern was. it may have been concerned about government intervention in the management and operations of the company. >> this discussion. it is what it is. it indicates that mr. lewis was concerned

chairman, to scott alvarez. had a good conversation with lewis just now, he confirms his willingness to drop the m.a.c., opposition to the deal going forward. and to work with the government to develop whatever support package might be needed for earnings announcements dates around january 20. we discussed his common equity issue, we agreed that having a significant amount of t.a.r.p. capital in the form of common equity was not an ideal solution given the ownership implications. but we agreed both to think about possible solutions, a government-backed capital raise or government common with limited control rights, now, it sounds to me liken lewis was concerned about his job and for the american taxpayer to get voting rights in return for their tarp money, mr. lewis would be gone. i believe. is that the concern that you believed mr. lewis expressed regarding the tarp being presented with rights, voting rights, for the american taxpayer in that deal? >> i don't know exactly what his concern was. it may have also

alvarez is a bit about -- and you see this the way the consultant works -- it is simply -- it's not -- there is less is this fundamentally sound, fundamentally good for the shareholder and for how does it compare to the practices of your peers. and so you do get a bit of a collective action where people say our five competitors to this and that becomes the beginning and end of the discussion, and i think that in power in compensation committees but also to say on page bringing this to light does have a powerful deterrent on say in the u.k. even from the study business school it was a positive affect on the tour in high payouts to those that perform pour early. >> we have another subcommittee hearing, so we will take a break and we'll have to votes so won't be gone that long. and will take your questions and then break for the vote. >> many years ago my husband worked in wall street. he started out in wall street i believe when he was 17 and he worked his way up and worked for a large financial service company. he was in compliance and had the whole northeast corridor to good of office