Goldman Sachs Group Inc. must be cautious about handing out record bonuses while the banking industry is still under distress or risk spurring an outcry from Congress, Sen. Mark Warner said.
“I do hope that Goldman Sachs will be a little more sensitive to the optics of their actions,” Warner, a member of the Senate banking committee, said.
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“They ought to be sensitive to the fact that the whole industry is still under a great deal of scrutiny,” said Warner, a Virginia Democrat. “You can end up seeing a reaction on the Hill if there’s not some of that sensitivity.”
Goldman Sachs, the biggest U.S. securities firm before converting to a bank holding company in September 2008, set aside $11.4 billion to pay compensation in the first six months of this year after reporting record earnings.
Goldman Sachs spokesman Lucas Van Praag didn’t immediately return messages seeking comment.
Warner said the banking committee will finish drafting legislation based on President Obama’s proposal to overhaul U.S. financial regulations this month and will meet in November to consider amendments. The legislation can be finished next month, he said.
“If we did not learn the lessons of the worst financial meltdown in all our lifetimes and try to put new rules of the road in place, I think it would be a disaster,” Warner said.
Warner said he supports creating a council of regulators to monitor systemic risk that would include the Federal Reserve and the Treasury Department, adding that there is a sense on the committee that setting up a council is the “right way” to go.
The banking panel will consider creating a single bank regulator by merging the oversight powers of the Federal Reserve and the Federal Deposit Insurance Corp., with the Office of the Comptroller of the Currency and the Office of Thrift Supervision, Warner said.
Warner said the government shouldn’t have a say in who replaces Kenneth Lewis as chief executive officer of Bank of America Corp.
“I actually think that the board ought to be making that decision,” Warner said. “The government micromanaging these companies — that is a very dangerous place to be.”
Warner dismissed discussion about setting limits on Wall Street compensation, saying it’s “really hard to set an arbitrary cap.”
“The private sector will always find a way around that,” he said. “If too much risk was taken and we end up seeing the institution go down, some notion of a clawback makes a lot of sense.”
Warner said the Senate will pass a health care bill this year with 60 votes, adding that he hoped to see Republican support for the legislation.
Warner said Virginia voters’ concern about what is happening in Washington is causing Creigh Deeds, the Democratic Party’s gubernatorial candidate in Virginia, to fall behind.
“He’s got a month to close this race,” Warner said. “We can turn out the more moderate voters if we can make this a choice not about what is going on in Washington, but about the record of the last eight years in Virginia.”
