Lawmakers want closer scrutiny of Wall Street exec pay

— -- Last December, Wall Street firms paid a total of $33.2 billion in bonuses for 2007, according to New York state's comptroller office. Those fat bonuses were handed out barely three months before the stunning downfall of investment bank Bear Stearns — the first domino to fall during the current global financial crisis.

Wall Street has since spiraled into a far deeper hole under the weight of worthless assets and bad loans, and nine major U.S. banks have received $125 billion from the U.S. government. Now, lawmakers are calling for closer scrutiny of the compensation structure on Wall Street as concern grows that the same banks that are taking American taxpayers' money will hand out only a slightly pared version of the usual plump bonuses.

"The incentive structure of the finance industry should be looked at closely," says Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee. He plans to hold hearings on Nov. 12 and Nov. 18 and says he will raise the subject of bonuses. "It's a perverse structure if it's heads I win and tails I break even."

Since Frank first called for a freeze on all Wall Street bonuses, others, including Speaker of the House Nancy Pelosi and Senate Majority Leader Harry, Reid have warned of negative consequences if bonuses are paid out by taxpayer-subsidized banks.

To award bonuses when the country is weathering its worst financial crisis in decades only reveals how broken Wall Street's pay structure is, critics say. This year has seen the demise of several U.S. financial titans: JPMorgan Chase bought Bear Stearns in a fire sale, Lehman Bros. filed for bankruptcy, and Bank of America bought Merrill Lynch. "Wall Street has some of the most money-motivated people on Earth, and they will not be denied," says Robert Salwen, an executive compensation attorney.

Wall Street has always been known for exorbitant payouts. Graef Crystal, an executive pay expert and author of In Search of Excess: The Overcompensation of American Executives, points out that a paper-cup manufacturer can squeeze only a certain amount of profits making the cups. "On Wall Street, you can make 50 million bucks at the drop of a hat," says Crystal.