Bernanke: Exec compensation must be monitored

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Bernake tells bankers to lend

PHOENIX -- Federal Reserve Chairman Ben Bernanke says banking supervisors must pay "close attention" to compensation practices as they examine the soundness of financial institutions.

In remarks prepared for a meeting of smaller "community" banks in Phoenix, Ariz., Bernanke says regulators have observed that "poorly designed compensation policies can create perverse incentives that can ultimately jeopardize the health of the banking organization."

The Fed chief's remarks come amid public and congressional outrage over bonuses paid to employees of American International Group Inc., which has been bailed out by the government four times.

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