In Argentina, Nobel prize-winning economist calls for greater regulation of bonuses

[Judi Lynn]

In Argentina, Nobel prize-winning economist calls for greater regulation of bonuses
JEANNETTE NEUMANN | Associated Press Writer
3:23 PM EDT, March 26, 2009

BUENOS AIRES, Argentina (AP) — Nobel prize-winning economist Edmund Phelps called on Thursday for greater regulation of bonuses for employees and executives at U.S. financial institutions, saying stepped-up control is "politically demanded" amid the global downturn.

"Bonuses are an invitation to 'short-termism,' never mind the future," said Phelps, in Buenos Aires for an economic congress. Large bonuses discourage employees and executives from considering long-term benefits of business decisions in order to guarantee a juicy year-end bonus, he said.

Phelps' comments come as many Americans are still simmering over the $165 million in bonuses insurance giant American International Group Inc. distributed to employees of its financial products group after the government committed more than $182 billion to keep the company afloat.

The U.S. government on Thursday unveiled a sweeping overhaul of the financial system that would represent a major expansion of federal authority, imposing tougher standards on financial institutions judged to be so big that their failure would represent a risk to the entire system.

More:
http://www.orlandosentinel.com/business/nationworld/sns-ap-lt-argentina-phelps-economy,0,577670.story