Banks face questions about pay
Leaders in Congress and N.Y. attorney general take issue with executive compensation at firms aided by the bailout.
10/30/2008 12:00 AM
10/30/2008 7:47 AM
New York's attorney general joined congressional leaders in laying siege Wednesday to executive compensation paid by banks benefiting from the government's $700 billion rescue plan.
New York Attorney General Andrew Cuomo sent letters to Bank of America Corp., Wells Fargo & Co., JPMorgan Chase & Co., Citigroup Inc. and five other banks that received taxpayer bailout funds, demanding bonus information for top management.
Cuomo said he wanted a detailed accounting of expected payments to top executives in the “upcoming bonus season,” including information on the expected bonus pool for this year, according to a copy of the letters. He requested information on bonuses from before and after the banks knew they would receive money from the Troubled Asset Relief Program.
In their own letter Wednesday, House Speaker Nancy Pelosi of California and Majority Leader Harry Reid of Nevada urged Treasury Secretary Henry Paulson to put more restrictions on bank executives' compensation, particularly at companies benefiting from the government's $700 billion rescue plan.
The two leading Democrats in Congress told Paulson that voters want the Treasury to be tougher about how much banking executives can earn in so-called “golden-parachute” payments.
Pelosi and Reid raised concern about participants in the Treasury's program to inject capital into banks in exchange for an equity stake. Paulson has set aside $250 billion of the rescue program for those purchases.
“News reports have suggested that six major financial institutions participating in the program have plans to pay their executives billions of dollars,” Pelosi and Reid wrote in the letter. “Such reports understandably infuriate many Americans.”
They asked Paulson to consider further restrictions on severance payments from healthy institutions that take part in the equity purchase program. The Treasury plan currently imposes stricter golden-parachute limits on “systemically significant failing institutions” in the program, according to the letter.
Treasury spokeswoman Brookly McLaughlin said the Treasury has received the letter and was reviewing it.
In his letter, Cuomo told the banks' boards of directors he thought they were in the best position to respond to the requests because top management has a “significant interest in the size of the bonus pools.” He said he would have grave concerns if the expected bonus pool increased in any way as a result of the receipt of taxpayer money.
“In this new era of corporate responsibility we are entering, boards of directors must step up to the plate and prevent wasteful expenditures of corporate funds on outsized executive bonuses and other unjustified compensation,” Cuomo wrote.
The other banks he wrote to are Goldman Sachs Group Inc., Bank of New York Mellon Corp., Merrill Lynch and Co., Morgan Stanley and State Street Corp. Representatives of the nine firms declined to comment or couldn't immediately be reached for comment.
Cuomo also requested a description of the bonuses awarded in 2006 and '07 to employees receiving more than $250,000 in compensation.
Separately, House Minority Leader John Boehner, an Ohio Republican, wrote to Paulson to express concern about rescue money being used to pay for mergers, raises and bonuses.
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