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N.Y.'s Cuomo Seeks Bonus Data From Bailed-Out Banks
By KAREN FREIFELD
Jan 12, 2010 (Bloomberg) -- New York Attorney General Andrew Cuomo's office demanded information on executive pay from Bank of America Corp., Goldman Sachs Group Inc. and six other U.S. financial institutions that received taxpayer bailout funds.
Cuomo today sent letters asking for a description of each firm's 2009 bonus pool, how it was established, how compensation is tied to performance, and how the bonus pools have changed, if at all, as a result of the firm's receiving and repaying taxpayer funds. Almost all the banks have repaid the money.
Cuomo's announcement came amid reports that Wall Street's 2009 bonus season may be one of its largest, sparking a public and political backlash. The attorney general also asked for a list of the top 200 bonuses paid by each firm and a description of each bank's rate of lending over the last three years. He set a response deadline of Feb. 8.
"Transparency and disclosure of the banks' practices and plans are essential especially at this time," Cuomo said in a teleconference with reporters.
Besides Bank of America and Goldman Sachs, the attorney general demanded the information from JPMorgan Chase & Co., Bank of New York Mellon Corp., Citigroup Inc., Morgan Stanley, State Street Corp. and Wells Fargo & Co.
Cuomo said his office had a right to the information "to make sure they are following the law, that there is no fraud, that there's adequate disclosure." He said his jurisdiction was the Martin Act, the state securities law.
Last Year's Effort
Cuomo last year demanded similar information from the same banks. He found that they paid $32.6 billion in bonuses in 2008 while receiving $175 billion in taxpayer funds through the Troubled Asset Relief Program, or TARP. The attorney general issued a report called "No Rhyme or Reason: The 'Heads I Win, Tails You Lose' Bank Bonus Culture."
"As we informed your firm last year, when you received TARP funding, your firm took on a new responsibility to taxpayers," Cuomo said in his letter to Bank of New York Mellon, a copy of which was attached to a press release today. "While your firm has now paid the TARP money back, it is not clear that your firm would have been in the same position now had you not received that TARP money."
Bank of America won't decide on its year-end incentives until the end of the month, spokesman Scott Silvestri said.
"When we receive the letter we'll study the request and provide a response by his deadline," Silvestri said.
Banks' Responses
Melissa Murray, a spokeswoman for Wells Fargo, confirmed that the company received Cuomo's letter and that officials are reviewing it.
"We're accountable to and are in compliance with all the rules as they pertain to TARP," Murray said. "Our team members are compensated on individual and business performance."
Street Street's spokeswoman Arlene Roberts and Citigroup's Stephen Cohen didn't respond to messages seeking comment.
Jeanmarie McFadden, a Morgan Stanley spokeswoman; Goldman Sachs's Michael Duvally; JPMorgan's Joe Evangelisti; and Kevin Heine of Bank of New York Mellon declined to comment.
"It's obviously a popular issue right now, so seeking additional information keeps it in the headlines," said Mark Borges, a compensation consultant at Compensia Inc. in Corte Madera, California. "At the same time, it puts pressure on the banks to think through their compensation arrangements and decisions, as to form as well as amount -- something that they should be doing anyway."
Easy Target
Another compensation expert said the bonuses are an easy target for politicians.
"Cuomo is feeding off the popular sentiment, gearing up for his election campaign," said Michael Deutsch, a partner and co-founder of Singer Deutsch LLP, which focuses on employee compensation in the financial services industry. "He's trying to make hay over the public anger over Wall Street bonuses."
Cuomo plans to run for governor of New York, people familiar with his thinking have said.
He said today that New Yorkers and other Americans are still suffering with 10 percent unemployment and a decline in home values. He said he wanted to see whether the latest bonuses promoted short-term book profits or sustainable long-term growth in the economy.
Christina Romer, chairwoman of the White House Council of Economic Advisers, said yesterday she hopes banks and other companies that received federal bailout money will show restraint on bonuses.
"The idea that as the financial system heals they just go back to business as usual is simply outrageous," she said.
Wall Street firms' pay has traditionally been tied closely to performance of the companies, which is why employees receive most of their compensation at the end of the year after final results are known. Depending on seniority and performance, bonuses for traders, bankers and executives can be a multiple of their salaries, which range from about $80,000 to $600,000.
--With assistance from Joshua Fineman, Ian Katz and Matthew Townsend in New York and Cary O'Reilly in Washington. Editors: John Pickering, Charles Carter
