The paper mill that is Washington, DC, keeps churning out reports that are interesting, revolting and/or astounding. Last week, the American Enterprise Institute for Public Policy Research issued an 11-page report: “The Money in Banking: Comparing Salaries of Bank and Bank Regulatory Employees.” The title piqued my interest, so I read it, and it was astounding! The author, Paul H. Kupiec, compared average salaries paid to bankersagainst those paid toemployees of the Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corp. (FDIC) and the Consumer Financial Protection Bureau (CFPB).
You may be wondering why the Federal Reserve System (Fed) was not included in the comparison. Incredibly, the Fed does not release its employee compensation data to anyone; it has even refused to release data in response to a Freedom of Information Act request. Neither does the Fed publish data on its total annual employee compensation costs or number of employees. It does report annually the total compensation and number of employees to Congress, broken into each of the 12 Fed districts, but it does not report the Federal Reserve Board information. Don’t these people work for us? Don’t we have a right to know?
The result of the comparison with OCC, FDIC and CFPB shows that their employees are paid more than 2.7 times the wages of the average banker. Stunning! Granted, these people do have important jobs, but they don’t have to meet a payroll, like bankers do. They don’t have to break the news to prospective borrowers that their loan requests cannot be accommodated. They don’t have to scramble to secure deposits, or figure out where to borrow funds to meet loan demand, or face and answer to demanding shareholders, and on and on. I do understand that banks employ a high percentage of tellers and clerical staff, while regulatory agencies have few similar positions. However, even comparing management-level positions, the bank regulatory agencies are at about two times the average compensation of bankers.
Since FIRREA* went into effect in 1989, federal bank regulatory agencies have been allowed to set their own compensation and benefits levels, a gross overreaction to the savings and loan crisis of the late ’80s. Congress passed the language because of the perceived lack of preparedness by savings and loan regulatory agencies to that crisis. Additionally the Dodd-Frank Act empowered the National Treasury Employees Union (NTEU) to negotiate compensation for OCC employees. The NTEU already had been representing FDIC employees.
As a result, it is even more interesting to see how the bank regulatory agencies compare to other federal government agencies. According to this research paper, bank regulatory agencies employees are paid, on average, about 20 percent more than other federal government agency employees. For perspective, the average federal government employee makes about 60 percent more than the typical private-sector employee.
All of these federal government employees work for us, the citizens and taxpayers. Why are they making so much more than those of us in the private sector? Frankly, I am offended. Bankers and their customers pay for the bank regulatory system through insurance fees at FDIC and through examination fees at OCC and CFPB. Someone should be monitoring the private sector compensation structure at each of these agencies to ensure that those monitoring the work of real bankers are not being paid more than real bankers. That same requirement should apply to the nonbank federal government agencies to close the gap between private sector and public sector compensation and benefit practices.
I encourage you to peruse this report and come to your own conclusions.
*The Financial Institutions Reform, Recovery and Enforcement Act of 1989
– S. Joe DeHaven