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Table Of Contents

I. INTRODUCTION
II. REGULATORS’ PAY AND ITS DISCONTENTS
A. A Short History of Performance Pay for Regulators
B. Toward Regulator Pay for Performance
III. REGULATORS’ PAY AND THE GREAT FINANCIAL CRISIS
A. What Bank Regulators Do
1. The Bank Examination Process
2. Regulators’ Power over Banks
1. Anatomy of a Regulatory Failure
2. Silver State Bank
3. Washington Mutual
C. A Public Choice Account
1. Pay for Bureaucratic Performance
2. Bureaucratic Incentives
3. Summary
IV. INCENTIVIZING REGULATORS
A. A Theory of Incentive Pay for Bank Regulators
B. Mapping Incentive Pay for Regulators
1. Performance Pay for Bankers
2. Performance Pay for Regulators
C. How Much Incentive?
1. Regulator Risk Aversion
2. Regulator Self-Selection
D. Potential Ancillary Benefits
V. THE STRUCTURE OF PERFORMANCE PAY FOR REGULATORS
A. The Debt-Equity Portfolio
B. Structuring the Debt-Equity Portfolio
1. Bank Debt Incentives
2. Subordinated Debt versus CDS
3. BHC Equity
4. The Appropriate Mix of Debt and Equity
C. The Shutdown Decision
1. Why a Special Shutdown Bonus?
2. Calculating the Bonus
3. Additional Considerations
VI. QUALIFICATIONS AND OBJECTIONS
A. Strategic and Perverse Incentives
1. Crowding Out the Public Interest
2. Insider Trading
B. Noisy Proxies
C. Why Not Just Improve Bank CEO Incentives?
E. Increased Compensation Costs
F. Incentivizing the Right People
VII. CONCLUSION
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Pay for Regulator Performance

Pay for Regulator Performance

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Published by Steven C. Wu

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Published by: Steven C. Wu on Sep 30, 2011
Copyright:Attribution Non-commercial

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09/30/2011

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