<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0><TBODY><TR>New York may seek to claw back $6b in Merrill bonuses
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Mr Cuomo (left) may demand the return of US$4 billion in bonuses doled out by Merrill Lynch, while Mr Dodd said 'every possible legal means' should be used to claw back the money.
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<!-- START OF : div id="storytext"--><!-- more than 4 paragraphs -->NEW YORK: - Is the clawback of multimillion-dollar bank bonuses about to begin?
Bloomberg, quoting a source, reported on Thursday that New York Attorney-General Andrew Cuomo may demand the return of US$4 billion (S$6 billion) in bonuses doled out a month earlier than usual by Merrill Lynch just before it was acquired by Bank of America and before Merrill's disclosure of a US$15 billion net loss in the fourth quarter.
'No longer will this country stand for wasteful spending of tax dollars on bonuses for executives whose companies have taken huge losses and required taxpayer bailouts,' Mr Cuomo said on Thursday in a statement.
In October, he sent letters demanding data from Citigroup, JPMorgan Chase and seven other banks that qualified for bailout funds under the Troubled Assets Relief Programme. The request came a day after congressional investigators asked the banks to justify their bonuses.
Weighing in on Thursday, Senator Christopher Dodd, chairman of the United States Senate Banking Committee, said 'every possible legal means' should be used to claw back the money.
But the sober reality, compensation experts said, is that most, if not all, of the money that the banks have paid out is probably gone for good.
Thursday's salvos from President Barack Obama may have been partly intended to shame Wall Street into action, but there are actually few legal options for recovering employees' pay, unless those employees were involved in fraud or other wrongdoing.
Even if Congress rewrote the laws to demand that Wall Street firms cancel their bonuses, such action might put the corporations in violation of their legally binding compensation plans, said Mr Michael Melbinger, a compensation lawyer at Winston & Strawn in Chicago.
Several companies have recouped bonuses from executives and employees in recent years but those battles have been long and hard.
Regulators spent years trying to get former Fannie Mae chief executive Franklin Raines to return his bonuses after accounting problems surfaced at the mortgage giant, and got only part of the money back.
Mr Cuomo also threatened to bring such a suit on behalf of New York State against the American International Group, the insurance giant, to compel it to recover bonuses that had been paid and to suspend further payments. The company agreed to cooperate with Mr Cuomo's office and suspended future bonuses, but it has not yet recovered previous payments.
Recovering money from rank-and-file bank employees is even tougher as there is no law against making bad decisions, even when those decisions lead to crippling losses.
Pay experts noted that while bankers earn far more than people in many other fields, bonuses account for a large part of total compensation on Wall Street. Within the industry, many see bonuses as a kind of deferred salary, rather than a reward for good performance. And some employees may have done their jobs well, even though their banks lost billions.
How bonuses are paid in the future is another matter, of course.
The growing backlash against the fat bonuses banks pay is putting pressure on them to change how they reward their employees, particularly when that bonus turns out to be based on phantom profits, as was often the case in recent years.
UBS is the best example so far.
In return for a bailout from the Swiss government last year, UBS agreed to big changes in its pay practices, including clawing back payments if the actions of employees subsequently hurt the bank.
Because of these changes, UBS will be slashing bonuses for its investment bank by more than 80 per cent this year. Moreover, bonuses for the highest-ranking executives will be paid out entirely in deferred shares and zero cash, sources said.
The deferred compensation will be distributed in three instalments, each of which may be cancelled in any year the bank reports a loss, the sources added. BLOOMBERG, NEW YORK TIMES, REUTERS
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Mr Cuomo (left) may demand the return of US$4 billion in bonuses doled out by Merrill Lynch, while Mr Dodd said 'every possible legal means' should be used to claw back the money.
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<!-- START OF : div id="storytext"--><!-- more than 4 paragraphs -->NEW YORK: - Is the clawback of multimillion-dollar bank bonuses about to begin?
Bloomberg, quoting a source, reported on Thursday that New York Attorney-General Andrew Cuomo may demand the return of US$4 billion (S$6 billion) in bonuses doled out a month earlier than usual by Merrill Lynch just before it was acquired by Bank of America and before Merrill's disclosure of a US$15 billion net loss in the fourth quarter.
'No longer will this country stand for wasteful spending of tax dollars on bonuses for executives whose companies have taken huge losses and required taxpayer bailouts,' Mr Cuomo said on Thursday in a statement.
In October, he sent letters demanding data from Citigroup, JPMorgan Chase and seven other banks that qualified for bailout funds under the Troubled Assets Relief Programme. The request came a day after congressional investigators asked the banks to justify their bonuses.
Weighing in on Thursday, Senator Christopher Dodd, chairman of the United States Senate Banking Committee, said 'every possible legal means' should be used to claw back the money.
But the sober reality, compensation experts said, is that most, if not all, of the money that the banks have paid out is probably gone for good.
Thursday's salvos from President Barack Obama may have been partly intended to shame Wall Street into action, but there are actually few legal options for recovering employees' pay, unless those employees were involved in fraud or other wrongdoing.
Even if Congress rewrote the laws to demand that Wall Street firms cancel their bonuses, such action might put the corporations in violation of their legally binding compensation plans, said Mr Michael Melbinger, a compensation lawyer at Winston & Strawn in Chicago.
Several companies have recouped bonuses from executives and employees in recent years but those battles have been long and hard.
Regulators spent years trying to get former Fannie Mae chief executive Franklin Raines to return his bonuses after accounting problems surfaced at the mortgage giant, and got only part of the money back.
Mr Cuomo also threatened to bring such a suit on behalf of New York State against the American International Group, the insurance giant, to compel it to recover bonuses that had been paid and to suspend further payments. The company agreed to cooperate with Mr Cuomo's office and suspended future bonuses, but it has not yet recovered previous payments.
Recovering money from rank-and-file bank employees is even tougher as there is no law against making bad decisions, even when those decisions lead to crippling losses.
Pay experts noted that while bankers earn far more than people in many other fields, bonuses account for a large part of total compensation on Wall Street. Within the industry, many see bonuses as a kind of deferred salary, rather than a reward for good performance. And some employees may have done their jobs well, even though their banks lost billions.
How bonuses are paid in the future is another matter, of course.
The growing backlash against the fat bonuses banks pay is putting pressure on them to change how they reward their employees, particularly when that bonus turns out to be based on phantom profits, as was often the case in recent years.
UBS is the best example so far.
In return for a bailout from the Swiss government last year, UBS agreed to big changes in its pay practices, including clawing back payments if the actions of employees subsequently hurt the bank.
Because of these changes, UBS will be slashing bonuses for its investment bank by more than 80 per cent this year. Moreover, bonuses for the highest-ranking executives will be paid out entirely in deferred shares and zero cash, sources said.
The deferred compensation will be distributed in three instalments, each of which may be cancelled in any year the bank reports a loss, the sources added. BLOOMBERG, NEW YORK TIMES, REUTERS
