View from New York: Cuomo on a collision course with Wall Street

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The Independent Online

Wall Street banks are on notice that their bonus payouts this year will face legal scrutiny and even a court challenge if they do not take account of taxpayers' role in bailing them out. New York's attorney general, Andrew Cuomo, yesterday wrote to the eight largest recipients of US government money in 2008 demanding extensive information about their bonus payments and policies.

His intervention comes as Wall Street banks prepare to tell employees how much they will share in 2009's bumper profits, which could make the current bonus season one of the most lucrative on record. The White House was last night said to be considering a windfall tax as a way of responding to public fury over bonuses.

"Taxpayers paid a terrible price for this past economic recession," Mr Cuomo said. "No one can disagree that transparency and disclosure is essential."

His office has been investigating compensation practices at the investment banks since the bailout. In potentially the most explosive part of the dialogue between the two sides, banks are being asked by Mr Cuomo to guess what this year's bonuses would have been if they had not received bailout money.

Banks have wrestled with how to reform compensation practices, as well as whether to reduce the proportion of revenues traditionally set aside for employees. Don Lindner, compensation expert at WorldatWork, an association of human resources groups, said that a greater proportion of bonuses at top levels will be paid in stock, instead of cash, but that the size of bonuses is not likely to be crimped. "Almost everybody, including back office staff and secretaries, usual takes a low salary and a big proportion of their compensation in bonus. If they are getting more in stock and are required to hold that stock over time, employees may take a bit of a hit, even if the headline size of the bonus is quite large," Mr Lindner said.

At Goldman Sachs, the most powerful of Wall Street's banks, executives set aside $16.7bn for compensation in the first nine months of 2009, and the full-year total could work out at an average per employee just below $600,000, although that masks wide variations. Aware that it is a lightning rod for public anger, Goldman is considering requiring top executives to put a portion of their bonus into a fund for charity.