Obama, Cuomo target Wall Street bonuses

The White House and New York's top prosecutor attacked excessive Wall Street bonuses, as the nation's biggest banks prepare to hand out awards critics say were made possible by taxpayer bailouts.

A senior U.S. official also confirmed President Barack Obama is considering a fee on financial services firms as part of the fiscal 2011 budget he will unveil in February.

The proposal reflects tougher approach the White House is taking toward Wall Street as it faces rising political heat over its support for the $700 billion financial bailout begun in the Bush administration.

Amid reports of some bank payouts that could average hundreds of thousands of dollars each, White House spokesman Robert Gibbs said some Wall Street executives continue not to get it when it comes to big bonuses at bailed-out companies.

Meanwhile, New York Attorney General Andrew Cuomo asked the first eight banks to receive bailout money under the government's much-maligned Troubled Asset Relief Program to turn over data on expected bonus payouts in 2009.

These banks are Bank of America Corp, Bank of New York Mellon Corp, Citigroup Inc, Goldman Sachs Group Inc, JPMorgan Chase & Co, Morgan Stanley, State Street Corp and Wells Fargo & Co.

Bonuses typically comprise the bulk of annual compensation for the most highly paid bankers and traders, regularly reaching seven-figure and, occasionally, eight-figure sums.

Huge profits and bonuses on Wall Street have outraged many Americans at a time when ordinary workers are struggling with double-digit unemployment. Accusations the Obama administration has coddled Wall Street could hurt his party's chances in this year congressional elections and have prompted the White House to seek distance from the financial community.

Some analysts have said the White House has not done enough to prevent financial firms from watering down proposed legislation to overhaul Wall Street regulations.

For some banks, close to 50 percent of revenue can be used for compensation, leaving less available for shareholders who retain power to vote out board directors responsible for overseeing pay in general.

It's the whole scheme that's problematic, said Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware. These bank compensation schemes are highly problematic, but is the political realm the appropriate place to resolve the issue?

TAXPAYERS STILL HURT, CUOMO SAYS

In letters to the eight banks, Cuomo requested details by February 8 about whether cash or stock is being used in awards, how banks tie pay to performance, how TARP money affected payouts and whether any awards can be recouped if bank fortunes sour.

Some banks made a lot of money because, in some cases, taxpayers gave them a lot of money, Cuomo said at a news conference.

Citing the nation's 10 percent unemployment rate, he added: The taxpayer is still paying that cost.

White House officials, including President Barack Obama, have stressed Wall Street owes the rest of the country a huge debt.

Obama is weighing proposals to be included in his budget next month that would help ensure that the money that taxpayers put up to rescue our financial system is paid back in full, Gibbs told reporters.

Some news reports said that, while the administration is considering a tax, it is steering away from proposals to do that in the form of a levy on bonuses or a financial transactions tax.

Other countries have put in place new taxes on financial compensation, including Britain and France.

But financial firms insist high compensation is needed to keep top talent.

If pay is curbed by the government or public pressure, bankers are likely to leave their firms for private equity, hedge funds or other firms outside the public eye, said Michael Deutsch, a partner at Singer & Deutsch LLP, a New York securities attorney who works with compensation issues.

Bank of America is also being sued by the U.S. Securities and Exchange Commission over its role in allowing Merrill Lynch & Co to pay $3.6 billion of bonuses for 2008 despite enormous losses. The bank bought Merrill one year ago.

Spokesman Scott Silvestri said Bank of America will respond to Cuomo's deadline on time and expects to set 2009 incentive pay by the end of January.

Bank of New York Mellon spokesman Kevin Heine and Morgan Stanley spokesman Mark Lake declined to comment. The other original TARP recipients did not immediately return requests for comment.

A Congressional commission is expected to begin a hearing on Wednesday into the causes of the financial crisis, including whether the push for outsized pay drove outsized risk-taking.

Speakers expected to testify include Bank of America Chief Executive Brian Moynihan, Goldman Chief Executive Lloyd Blankfein, JPMorgan Chief Executive Jamie Dimon and Morgan Stanley Chairman John Mack.

(Reporting by Caren Bohan, Jeff Mason and Matt Spetalnick in Washington, D.C.; Elinor Comlay, Kristina Cooke, Joan Gralla, Christian Plumb, Jonathan Stempel and Dan Wilchins in New York; Svea Herbst-Bayliss in Boston, and Joe Rauch in Charlotte, North Carolina; editing by Richard Chang and Andre Grenon)