Congress has made "progress" in reigning in risk-based compensation on Wall Street, a top Democratic legislator told CNBC Monday.
Rep. Barney Frank (D-Mass.), co-author of the Dodd-Frank law, said legislative efforts succeeded in discouraging the "perverse incentive" of the past by prompting companies to provide "more compensation in stock that is not going to be paid out for awhile." In the past, a lot of bonus money was paid in cash.
Goldman Sachsis among the major firms to take the new appraoch.
Frank, the senior Democratic member of the the House Financial Services Committee, said the intent was not to limit the "dollar amount" of bonuses but the kind of compensation. He added that so-called say-on-pay provisions will give shareholders more influence in compensation practices.
In a wide ranging interview with CNBC "Strategy Session" host David Faber in Davos, Frank discussed various aspects of the financial reform bill he helped push through Congress last year when the Democrats had a sizable majority.
There is "a need for the kind of legislation we did, " said Frank, who added, "you can't be too rigid.
Frank said new regulations on over-the-counter derivatives were based on a "market-oriented approach" and meant to reduce risk, while the The Volcker Rule on proprietary trading was meant to prevent government-insured firms from "gambling with your money."
Frank said he endorsed a phase out of the two mortgage giants, Fannie Mae and Freddie Mac, but was waiting for the GOP, which now controls the House, to move forward on the issue.