Back in March, the chairman of Wells Fargo, Richard Kovacevich, called the Obama administration's plan for bank stress tests "asinine" and asked, "Is this America -- when you do what your government asks you to do and then retroactively you also have additional conditions?"
Now the Treasury department may not allow Wells Fargo pay back the federal money it was "forced" to take, the New York Post reports. That could be for reasons involving the bank's balance sheet, but a skeptic might suggest that the government wants to keep its investment in Wells Fargo so that it can keep a handle on the outspoken Mr. Kovacevich's compensation. Though, as the New York Times reports this morning, the government may keep control of compensation decisions even after the banks pay back the money: "Treasury Secretary Timothy F. Geithner plans to testify on compensation on June 18, and that may be when he outlines the principles for the entire industry. Those principles will be permanent: when bailed-out companies return the government money, they will still have to follow those principles."
The Times doesn't even bother to spell out what would happen to a bank that did not follow the principles, but it is an interesting thought experiment. You might think that requiring a "permanent" change to bank compensation practices might require a law or something.
