Federal Bailout Funds and Executive Bonuses

The NY Times article Cuomo Asks for Pay Data From Banks reports that the New York Attorney General has joined Rep. Henry A. Waxman in seeking greater oversight of nine big financial institutions (Citigroup, Bank of America, Bank of New York Mellon, Goldman Sachs, JPMorgan Chase & Co., Merrill Lynch, Morgan Stanley, State Street Corporation and Wells Fargo) that received government aid under the recent bailout to be sure that they do not use the money for bonuses or other payments. According to the article, “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.”

The NY Attorney General’s letter asks the banks for “detailed accounting regarding your expected payments to top management in the upcoming bonus season.” In the letter, Cuomo suggest that such payments may violate N.Y. Debtor & Creditor Law § 274 as illegal fraudulent conveyances.

Rep. Waxman’s letters requesting compensation and bonus information for employees of major banks are available at the Committee on Oversight and Government Reform webpage.