New York Attorney General Andrew Cuomo Monday, urged eight banks and securities firms which had received and repaid TRAP funds to provide data related to the bonus paid by them to their employees in 2009, in particular 11 different descriptions related to the bonuses.
In a letter Cuomo said that his office which is conducting an inquiry into different aspects of executive compensation requires all the relevant information related to their compensation polices. The attorney general asked the 8 banks and securities firms to provide the data by February 8.
Cuomo noted that while these banks and Wall Street firms had repaid the bailout funds which they had received in 2008 under the U.S. government's Troubled Asset Relief Program, it is not certain if they would have been in the same position if they had not received the TARP fund from the government.
The eight banks and securities firms from which the data are sought are Bank of America Corp. (BAC), Bank of New York Mellon Corp. (BK), Citigroup Inc. (C), Goldman Sachs Group Inc. (GS), J.P. Morgan Chase & Co., Morgan Stanley (MS), State Street Corp. (STT) and Wells Fargo Corp. (WFC)
Cuomo asked the banks to specifically provide 11 different descriptions which include, details regarding cash and stock bonus, the effect of the TRAP fund on their bonus, the impact of absence of TRAP fund on the bonus, list of compensation consultants and break up of number of employees who receive any bonus more than $1 million.
Reports indicate that according to the New York State Comptroller's Office, the six major banks have allotted $112 billion for compensation in the first nine months of 2009 and at that rate, for the full year the bonus allotment could go up to $150 billion, slightly less than the record $164 billion these banks had paid in 2007 before the economic crisis had hit the financial institutions.
The attorney general reportedly said that incentives paid to the employees should build strong institutions and not that the incentives paid to the employees build these institutions for short-term and fictional profits.
Most of these major U.S. financial institutions were suffering during the initial stages of the economic crisis. The federal government allotted TRAP funds, in order to stabilize these financial institutions and avoid magnification of the crisis in case any bank fails.
Using the unprecedented assistance by the government, these institutions recovered faster than the general economy. "The average New Yorker, average American is still paying the price for this terrible economic debacle," Cuomo reportedly said.
The attorney general expects to examine the data for any fraud and disclose the compensation related information to the public and shareholders. In the second half of 2009, some of these banks had raised capital by issuing shares and repaid the TRAP funds.
On Monday, C closed up 1.25%, BAC closed up 1.22%, WFC closed down 0.28%, JPM closed down 0.22%, STT closed down 2.55%, BK closed down 1.90% and MS closed down 0.99%.
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