9 Banks Pay $33 Billion in Bonuses
NEW YORK -- Nine Wall Street banks doled out a combined $33 billion in 2008 bonuses to employees despite losing billions of dollars and receiving an unprecedented government bailout, New York Attorney General Andrew Cuomo said Thursday.
In a report, Cuomo said that his nine-month investigation found that even though banks tout the importance of tying pay to performance, compensation has become "unmoored from the banks' financial performance."
When the banks did well, their employees were paid well," the report said. "And when the banks did very poorly, they were bailed out by taxpayers, and their employees were still paid well."
The report comes as the House considers a bill this week to give shareholders a say on pay for top executives. The findings could add momentum, experts say, to ongoing efforts to reform executive compensation. Lawmakers have blamed Wall Street's pay structure for helping precipitate the financial meltdown by encouraging traders to take excessive risks.
Cuomo's report said that Citigroup and Merrill Lynch, which is now owned by Bank of America, received combined government bailouts of $55 billion and lost $54 billion last year, but still paid out $9 billion in 2008 bonuses.
Meanwhile, Goldman Sachs, Morgan Stanley and JPMorgan Chase shelled out more in 2008 bonuses than they earned, the investigation revealed. The report covered nine banks that received a total of $175 billion in government funds last year. Some of those institutions, including Goldman Sachs and JPMorgan, have since paid back those funds.
Goldman Sachs, Morgan Stanley, JPMorgan, Citigroup and Bank of America declined to comment on the findings. But Scott Talbott, a senior vice president at the Financial Services Roundtable, which represents large banks, said that banks have "already moved to strengthen reliance on deferred compensation plans that provide long-term incentives to employees." During a recession, banks' ability to "attract and retain qualified personnel is all the more important," Talbott adds.
But Jonathan Macey, a Yale University law professor, says that banks' argument that they need hefty pay packages for workers "depends on an erroneous assumption that these people are irreplaceable. People are very happy to have jobs." (c) Copyright 2009 USA TODAY, a division of Gannett Co. Inc.
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