Bailo​ut banke​r pay targe​ted by lawma​kers,​ Cuomo​

[Mrs. Sharon B. Hodge]

Bailout banker pay targeted by lawmakers, Cuomo
The prospect of taxpayer money lining the wallets of executives at banks being bailed out by the government prompted congressional leaders and New York's top law enforcement official on Wednesday to demand answers from the banks themselves and the Treasury Department.


The officials' requests reflect growing concern among some lawmakers about the rapidly evolving shape of the Bush administrati More..on's $700-billion bank bailout program.


With credit markets in crisis and stocks roller-coastering daily, Treasury Secretary Henry Paulson is managing a program that was initially set up to buy troubled mortgage-backed bonds, but now is focused chiefly on buying stock in banks, and possibly helping other businesses such as insurers.


Rep. Barney Frank, chairman of the House of Representatives Financial Services Committee, on Wednesday scheduled a hearing for November 18 to look into what's happening with Paulson's fast-moving program, co-managed by the Federal Reserve, and known as the Troubled Asset Relief Program (TARP).


Senate Majority Leader Harry Reid and House Speaker Nancy Pelosi, the top Democrats in Congress, on Wednesday expressed concern about senior executive pay at financial institutions benefiting from taxpayer assistance.


The law enacting the controversial program set limits on executive pay at participating banks, but Reid and Pelosi said in a letter to Paulson that those limits may need tightening.


"News reports have suggested that six major financial institutions participating in the program have plans to pay their executives billions of dollars," said Pelosi and Reid, who represent California and Nevada, respectively. "Such reports understandably infuriate many Americans.
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The Treasury Department confirmed on Wednesday that it has spent $125 billion to purchase preferred shares of stock in nine large banks under the program.


BONUSES IN '07 AT $50 BLN

Those nine banks paid out an estimated $50 billion of bonuses in 2007, based on the total compensation expense for the companies, and assuming that for investment banks about 60 percent of total compensation was allocated for bonuses, and for commercial banks about 20 percent went to bonuses.


Critics of the bailout program told Reuters earlier this month that its compensation restrictions may not rein in CEO pay at banks getting government cash infusions because the rules are vague and subject to interpretation.


While the pay limits do restrict things like so-called "golden parachute" severance awards, they set no precise limits on corporate leaders' pay, the critics said.


"Given the level of public outrage ... we hope you will seriously consider strengthening the restrictions on executive compensation," Pelosi and Reid told Paulson in the letter.


A Treasury Department spokeswoman said every bank that accepts money under the stock purchase portion of the TARP must agree to the pay restrictions passed by Congress and every bank that is receiving funds has done so.


Another Democrat, New York Attorney General Andrew Cuomo, demanded information about executive bonus pools from the nine banks involved in the Treasury bailout -- including Bank of America, Citigroup and Goldman Sachs.


Cuomo asked the banks to explain how they intend to protect taxpayer funds received through the program. He said bonus payments made by "undercapitalized firms" may be illegal.


Letters from Cuomo also went to Bank of New York Mellon, JPMorgan Chase, Merrill Lynch, Morgan Stanley, State Street and Wells Fargo.


"We will have grave concerns if your expected bonus pool has increased in any way as a result of your receipt or expected receipt of taxpayer funds from" the federal bank bailout program, Cuomo said in the letters.


House Republican Leader John Boehner, of Ohio, also shot off a letter to Treasury, questioning its "apparent decision to permit banks to use bailout money to pay bonuses to executives and acquire other banks," said a statement from his office.


Bank of America, Goldman, Morgan Stanley, Merrill, JPMorgan, Bank of New York Mellon and Wells Fargo officials declined to comment. A State Street representative was not immediately available.


A Citigroup spokesman said the bank will cooperate with inquiries into wages, health insurance and benefits and "adhere to applicable legal and regulatory requirements.
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