Andrew Cuomo (D)
NEW YORK (Legal Newsline) - New York Attorney General Andrew Cuomo released a comprehensive report Thursday that analyzed 2008 bonuses for the nine banks that received Trouble Asset Relief Program financing from the U.S. government.
The report is titled "No Rhyme or Reason: The 'Heads I Win, Tails You Lose' Bank Bonus Culture."
"There is no clear rhyme or reason to the way banks compensate and reward their employees. In many ways, the past three years have provided a virtual laboratory in which to test the hypothesis that compensation in the financial industry was performance-based," Cuomo said in the report. "But even a cursory examination of the data suggests that in these challenging economic times, compensation for bank employees has become unmoored from the banks' financial performance."
The Democratic AG's office has been investigating the causes of last year's economic downturn and examining the compensation structures employed by various banks and firms.
Cuomo's report shows that regardless of whether a bank did well or not, their employees were paid well, and even when the banks did very poorly, they were bailed out by taxpayers and their employees were still paid well, It further showed that bonuses and overall compensation did not vary significantly as profits diminished.
Two illustrate the point, the study showed that both Citigroup and Merrill Lynch suffered massive losses of more than $27 billion at each firm. Nevertheless, Citigroup paid out $5.33 billion in bonuses and Merrill paid $3.6 billion in bonuses. Together, they lost $54 billion, paid out nearly $9 billion in bonuses and then received TA~ bailouts totaling $55 billion.
When analyzing the other firms, it was found that Goldman Sachs, Morgan Stanley, and JP. Morgan Chase all had 2008 bonus payments that were substantially greater than the banks' net income. Goldman earned $2.3 billion, paid out $4.8 billion in bonuses, and received $10 billion in TARP funding.
Morgan Stanley earned $1.7 billion, paid $4.475 billion in bonuses, and received $10 billion in TARP funding. JP Morgan Chase earned $5.6 billion, paid $8.69 bil1ion in bonuses, and received $25 billion in TARP funding. Combined, these three firms earned $9.6 billion, paid bonuses of nearly $18 billion, and received TARP taxpayer funds worth $45 bil1ion.
Other banks, like State Street and Bank of New York Menon, paid bonuses that were more in
line with their net income. State Street earned $1.8 billion, paid bonuses totaling approximately $470 million, and received $2 billion in TARP funding.
A revealing chart in the report reveals each banks' earnings/losses, bonus pool, number of employees, earnings per employee, bonus per employee, amount of TARP funds received and the amount of bonus payments in excess of $3 million, $2 million and $1 million. Individual breakdowns of the nine banks follow.
Cuomo's office vows to continue their investigation and do something to correct the injustices of the system.