Banks getting U.S. help face new heat over bonus plans

Just include the words "bonus" and "banker" in the same sentence, and it’s guaranteed you’ll trigger a political dog pile these days.

Bloomberg News on Monday published a story about the billions of dollars that major investment banks have set aside for employee bonuses this year -- despite the firms’ financial woes and despite the government help that many of them have been getting in one form or another.

That provoked a letter from Rep. Henry Waxman (D-Calif.) to nine major banks on Tuesday, asking them to justify their bonus plans, considering the Treasury’s program to inject a total of $250 billion in taxpayer funds into financial companies.

Today, New York Atty. Gen. Andrew Cuomo jumped into the fray, demanding that the biggest banks participating in the U.S. capital infusion program detail their plans for bonus payments to top executives.

From Bloomberg News:

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. He requested information on bonuses from before and after the banks knew they would receive funds from the [Treasury’s] Troubled Asset Relief Program.

Cuomo told the 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 funds.

"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.

Ah, but how to judge what’s "outsized" or "unjustified" in the financial services industry, where bonus payments are standard operating procedure? Do regulators just default to Supreme Court Justice Potter Stewart's famously simple definition of hard-core pornography: "I know it when I see it"?

The Treasury’s bailout plan places specific restrictions on certain elements of executive pay (particularly golden parachutes) for banks that get taxpayer funds.

But as for compensation overall, the statute governing banks that participate in the program is pretty fuzzy. It says that any bank receiving taxpayer money must ensure that "incentive compensation for senior executives does not encourage unnecessary and excessive risks that threaten the value of the financial institution."

As for those golden parachutes, check out this story on the payout to a retiring CEO of a mid-size South Carolina bank that has applied for a federal capital injection.

Photo: New York Atty. Gen. Andrew Cuomo (Dima Gavrysh / Bloomberg News)

Comments

[Mike De Santis]

Regarding bonuses, if the company's profits double, the exec bonus should be double the standard bonus. If profits are down 50%, then the exec bonus should fall to half of the standard. If the company is failing and needs government assistance, the exec bonus should be negative (i.e. fire the executives for non performance and/or negligence).

[WDA 2841]

If these institutions are getting bailout funds they shoild not be getting bonus money from the taxpayer's.
If our representatives allow this crap we should vote their sorry butts out of office with due haste...

[Justin]

Wow, our country really is in bad shape. I'm really disappointed with my country these days, especially during an election.

We have Washington, on one hand, that passes a bailout on top of $3 trillion in other bailout funds to help banks who then turn and plan to pay $50 billion in bonuses. We help AIG and they have a $450k orgy in California.

These banks and insurance companies whined and moaned like a three year-old that they needed a bailout and when it didn't pass the first time, they resorted to threatening the entire economy. Finally, they get their bailout and plan to pay bonuses? It's treason and theft, best case.

Then, we have to vote between an old fart who rushed to Washington to push the bailout and an inexperienced idiot who wants to redistribute wealth the other direction.

The middle class is getting bent over once more.

[James Monachino]

Fantasy Island Banking --

Cap the bonus programs and stop the distraction. The problems we are facing are not related to bankers bonus but to a decaying process. Results are showing the current program is flawed and a new direction must be pursued.

As the financial institutions continue to get squeezed a solution that motivates and distributes both pain and opportunity at the loan level offers the best solution. We have an infrastructure in place to deliver this kind of remedy through Freddie and Fannie Mae.

The American people own 80% of the organization and both agencies have a built in infrastructure to execute a variety of new programs at the loan level. Yes they have problems but they can be solved -- Politics has used these organization like a beach ball tossing them around at each others like a hot potato. But what you don't hear is how effect the two agencies have been over the decades for the working and middle class citizen.

We don't need bigger government - -just smarter use of available resources and some imagination. We can do it - - There are lots of ways to be successful.

People, we have to speak up and be heard. If you don't know what to say, say what you don't like. Stand up and be part of a solution, it is our life.

James Monachino

[Doreen]

This makes me so angry I want to hurt someone.

Buck up! People are losing their jobs.

Bonuses are when we HAVE money, not when we are asking for hand outs.

Anybody who gives just one single bonus to an employee, executive or not, should not get any handouts.

This bailout isn't helping me or the average Joe.

I am sick to death of the whining and snivelling beaurocrats who reside in their flaming mansions and snicker about how they know they are putting one over on everyone.

This should be the hottest topic in the country! On the news!

AIG! Bank of America!!

You give bonuses you get NO MONEY!

Stand up for it and put pressure on the legislature NOW before money is given out to them!!!

Time for them to lose their jobs and their homes for incompetence, not reward them for it.

Take a stand