It's bonus season on Wall Street, and with many financial institutions expected to hand out huge checks to their employees in coming weeks, New York Attorney General Andrew Cuomo today asked the eight biggest recipients of last year's $700 billion TARP bailout for "extensive information" on their planned bonuses.
"Taxpayers paid into government programs that aided the banks when they needed stability, and now those banks are immensely profitable," Cuomo said in a conference call with reporters. "The banks made a lot of money because the taxpayers gave them a lot of money."
As the Blotter has reported, Cuomo has been conducting an ongoing investigation into executive compensation, including last year's subpoenas of AIG chief Edward Liddy and former Merrill Lynch CEO John Thain about the multi-million-dollar sums paid to employees while those companies were in serious financial trouble. This year's bonus season has also been controversial, since the banks that received billions in aid have returned to profitability while the larger economy remains in the doldrums and unemployment is at 10 percent.
Cuomo sent letters to Bank of America, Bank of New York Mellon, Citigroup, Goldman Sachs, J. P. Morgan Chase, Morgan Stanley, State Street and Wells Fargo requesting detailed information on the total value of all bonuses to be rewarded, including compensation paid in cash, stock, or other incentives. He has asked for responses by February 8.
"When you received TARP funding," Cuomo wrote in the letters, "your firm took on a new responsibility to taxpayers. 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."
Cuomo will use the responses to his letters to determine if the banks have changed how they pay out incentives after being bailed out by taxpayer money.
"The bonuses should be based on incentives that actually build strong institutions, not based on incentives that bring this nation to its knees economically," Cuomo said to reporters.
In the letters, Cuomo asks the banks to describe how their bonuses would have been impacted had they not received TARP funding.
Last year Cuomo's office concluded a nine-month investigation into bank bonuses, publishing a July report that found banking compensation was frequently not tied to actual performance of an individual or their business group and the nation's largest financial institutions continued to pay compensation and benefits at their highest levels "even though bank performance plummeted."
"When the banks did well, their employees were paid well," said the report. "When the banks did poorly, their employees were paid well. And when the banks did very poorly, they were bailed out by taxpayers and their employees were still paid well. Bonuses and overall compensation did not vary significantly as profits diminished."
Cuomo hopes to use responses to his letters to put out a report on whether banks have changed their compensation packages. The Attorney General told reporters, "Transparency and disclosure are always a good thing."
A Bank of America spokesperson told ABC News the firm would be changing the structure of year-end compensation. Said the spokesperson, "In general, we will defer more compensation and will make more of it subject to fluctuations in our stock price." The spokesperson also said Bank of America would respond to Cuomo by his deadline.