Subject: File No. S7-12-11
From: Jim Steitz

May 31, 2011

Elizabeth Murphy
100 F Street, NE
Washington, DC 20549

Dear Murphy,

***Companies that compensate their traders and executives based on short-term profits on paper create a systematic bias in our economy toward unsustainable bubbles and evasion of responsibility for the company and trader involved. Marking the value of an asset by its present market value for the purpose of measuring trader performance allows traders and executives to engage in a shared fantasy about those values, creating short-term profits for the company while the public bears the downside risk of rescuing markets in collapse and companies that grow 'too big to fail.' It also causes the wasteful allocation of resources, by overvaluing and consequently overproducing an asset in the short term followed often by gross waste and attrition in the long term, as has occurred to housing. Government regulators must prohibit this immediate incentive-based compensation for traders and executives based on accumulation of paper wealth, and force compensation to be held in something akin to escrow until those profits are shown to be real and enduring, not the result of a short-term bubble.***

America paid a terrible economic price because of irresponsible risk-taking by Wall Street executives. Those executives took those risks because they knew that they could walk away with billions of dollars in bonuses and stock options and never pay for the long-term consequences of their actions. We need tough rules so that Wall Street pay packages don't encourage short-term risk taking.

Your rules should require at least a five year deferral period for executive bonuses at big banks, ban executive hedging of their pay packages, and require specific details from banks on precisely how they ensure that executives will share in the long-run risks created by their decisions. It should apply to the full range of important financial institutions, and draw in all the key executives at those companies.

Once this rule is passed, only you will know the details of its enforcement. But it's important for the public to know the progress you are making on this vital issue. You should report back to the public annually with a detailed report on progress in creating accountability for Wall Street pay.

Referencing Docket No.'s:

OTS:   RIN 155-AC49
OCC:  RIN 1557-AD39
Fed:    RIN 7100-AD69
SEC:   RIN 3235-AL06
FHFA: RIN 2590-AA42
FDIC:  RIN 3064-AD56


Mr. Jim Steitz