Cuomo Asks For Pay Data From Banks
By BEN WHITE and JONATHAN D. GLATER
30 October 2008
The New York Times
Late Edition - Final
1
Wall Street is coming under mounting political pressure to cut bonuses for
top executives, traders and bankers in what was already expected to be a
down year for pay.
Under pressure from members of Congress to curtail compensation, banks now
face a new threat from Andrew M. Cuomo, the New York attorney general, who
sent a letter on Wednesday to nine big financial institutions receiving
government aid.
Mr. Cuomo gave the companies a week to provide a ''detailed accounting
regarding your expected payments to top management in the upcoming bonus
season.''
That could prove difficult for the banks, which typically do not complete
bonus pools until later this month at the earliest.
Mr. Cuomo's letter also warned that payments worth more than the services
provided by executives might violate New York law.
The letter follows one sent earlier this week to the same banks by Henry
A. Waxman, the California Democrat who is chairman of the House Committee
on Oversight and Government Reform, urging them not to use any government
money for bonuses or other payments and asking for data on pay going back
to 2006.
The demands from Mr. Cuomo and Mr. Waxman reflect an increased concern
among lawmakers and regulators about payments to executives, which have
drawn strong public reactions since the government approved a $700 billion
bailout to stabilize the financial system. Other politicians have also
held private meetings with bank executives to warn them that big bonus
figures this year would create enormous political problems.
Any lawsuit based on the law cited by Mr. Cuomo would take some creative
legal footwork, said Edward R. Morrison, a law professor at Columbia
University. The law permits creditors to try to recover or block payments.
''You have to find a way for the attorney general, for Cuomo, to shoehorn
himself into the position of a creditor,'' Professor Morrison said. ''It's
not implausible.'' The attorney general could act under the law, Professor
Morrison said, if New York state pension funds hold bonds issued by the
nine companies. Mr. Cuomo might also claim jurisdiction over any of the
companies that might owe taxes to New York.
The attention raised questions on Wall Street, because bonus payments are
already expected to be as much as 50 percent smaller than last year and
perhaps even far smaller at banks that posted big losses. The New York
State comptroller estimated that Wall Street paid $33.2 billion in bonuses
for 2007, compared with $33.9 billion the year before.
Even banks like Morgan Stanley and Goldman Sachs, which produced decent
profits this year, are expected to award significantly smaller bonuses.
Lloyd C. Blankfein, the chief executive of Goldman Sachs, received bonus
and stock awards worth about $68.5 million last year, while Goldman's
co-presidents got just slightly less. Those numbers will not be repeated.
John J. Mack, Morgan Stanley's chief executive, declined to take a bonus
last year.
Last week, Mr. Cuomo reached an agreement with the American International
Group, the insurance conglomerate that has received tens of billions of
dollars in loans from the Federal Reserve, to freeze millions in payments
to former executives. His latest move appears to expand the inquiry into
executive compensation at companies participating in the government's
financial bailout program.
''Taxpayers are, in many ways, now like shareholders of your company,''
Mr. Cuomo wrote, ''and your firm has a responsibility to them.''
In his letter, Mr. Cuomo asked specifically for a description of bonus
pools for this year, a description of how money in those pools would be
allocated, an explanation of how that allocation might have changed since
each company received money under the federal Troubled Asset Relief
Program and a description of bonuses paid to executives earning more than
$250,000 in 2006 and 2007.
Mr. Cuomo's letter was sent to Bank of America, Bank of New York Mellon,
Citigroup, Goldman Sachs, JPMorgan Chase, Merrill Lynch, Morgan Stanley,
State Street and Wells Fargo, all of which received capital injections
from the government as part of a wide-reaching program to stabilize the
financial system. Representatives of Morgan Stanley, JPMorgan Chase, Bank
of America and Wells Fargo declined to comment on the letter.
Citigroup said it would ''cooperate with federal and state inquiries about
our global expenditures for wages, health insurance and other benefits,
which we believe reflect compensation best practices. In addition, we will
of course adhere to applicable legal and regulatory requirements,
including those in the federal government investment program, such as
restrictions on executive compensation.''
In an e-mail message, a spokeswoman for State Street said the bank was
''carefully evaluating'' Mr. Cuomo's request.
By BEN WHITE and JONATHAN D. GLATER
30 October 2008
The New York Times
Late Edition - Final
1
Wall Street is coming under mounting political pressure to cut bonuses for
top executives, traders and bankers in what was already expected to be a
down year for pay.
Under pressure from members of Congress to curtail compensation, banks now
face a new threat from Andrew M. Cuomo, the New York attorney general, who
sent a letter on Wednesday to nine big financial institutions receiving
government aid.
Mr. Cuomo gave the companies a week to provide a ''detailed accounting
regarding your expected payments to top management in the upcoming bonus
season.''
That could prove difficult for the banks, which typically do not complete
bonus pools until later this month at the earliest.
Mr. Cuomo's letter also warned that payments worth more than the services
provided by executives might violate New York law.
The letter follows one sent earlier this week to the same banks by Henry
A. Waxman, the California Democrat who is chairman of the House Committee
on Oversight and Government Reform, urging them not to use any government
money for bonuses or other payments and asking for data on pay going back
to 2006.
The demands from Mr. Cuomo and Mr. Waxman reflect an increased concern
among lawmakers and regulators about payments to executives, which have
drawn strong public reactions since the government approved a $700 billion
bailout to stabilize the financial system. Other politicians have also
held private meetings with bank executives to warn them that big bonus
figures this year would create enormous political problems.
Any lawsuit based on the law cited by Mr. Cuomo would take some creative
legal footwork, said Edward R. Morrison, a law professor at Columbia
University. The law permits creditors to try to recover or block payments.
''You have to find a way for the attorney general, for Cuomo, to shoehorn
himself into the position of a creditor,'' Professor Morrison said. ''It's
not implausible.'' The attorney general could act under the law, Professor
Morrison said, if New York state pension funds hold bonds issued by the
nine companies. Mr. Cuomo might also claim jurisdiction over any of the
companies that might owe taxes to New York.
The attention raised questions on Wall Street, because bonus payments are
already expected to be as much as 50 percent smaller than last year and
perhaps even far smaller at banks that posted big losses. The New York
State comptroller estimated that Wall Street paid $33.2 billion in bonuses
for 2007, compared with $33.9 billion the year before.
Even banks like Morgan Stanley and Goldman Sachs, which produced decent
profits this year, are expected to award significantly smaller bonuses.
Lloyd C. Blankfein, the chief executive of Goldman Sachs, received bonus
and stock awards worth about $68.5 million last year, while Goldman's
co-presidents got just slightly less. Those numbers will not be repeated.
John J. Mack, Morgan Stanley's chief executive, declined to take a bonus
last year.
Last week, Mr. Cuomo reached an agreement with the American International
Group, the insurance conglomerate that has received tens of billions of
dollars in loans from the Federal Reserve, to freeze millions in payments
to former executives. His latest move appears to expand the inquiry into
executive compensation at companies participating in the government's
financial bailout program.
''Taxpayers are, in many ways, now like shareholders of your company,''
Mr. Cuomo wrote, ''and your firm has a responsibility to them.''
In his letter, Mr. Cuomo asked specifically for a description of bonus
pools for this year, a description of how money in those pools would be
allocated, an explanation of how that allocation might have changed since
each company received money under the federal Troubled Asset Relief
Program and a description of bonuses paid to executives earning more than
$250,000 in 2006 and 2007.
Mr. Cuomo's letter was sent to Bank of America, Bank of New York Mellon,
Citigroup, Goldman Sachs, JPMorgan Chase, Merrill Lynch, Morgan Stanley,
State Street and Wells Fargo, all of which received capital injections
from the government as part of a wide-reaching program to stabilize the
financial system. Representatives of Morgan Stanley, JPMorgan Chase, Bank
of America and Wells Fargo declined to comment on the letter.
Citigroup said it would ''cooperate with federal and state inquiries about
our global expenditures for wages, health insurance and other benefits,
which we believe reflect compensation best practices. In addition, we will
of course adhere to applicable legal and regulatory requirements,
including those in the federal government investment program, such as
restrictions on executive compensation.''
In an e-mail message, a spokeswoman for State Street said the bank was
''carefully evaluating'' Mr. Cuomo's request.