Yesterday, Representative Henry Waxman (D-California), as Chairman of the House Committee on Government Oversight and Reform, sent a letter to the chief executive officers of nine major banks receiving $125 billion in taxpayer funds as part of the federal government’s financial rescue plan, in which he questioned the “appropriateness of depleting the capital that taxpayers just injected into the[se] banks through the payment of billions of dollars in bonuses, especially after one of the financial industry’s worst years on record.” The following banks received Waxman’s letter: Bank of America, Bank of New York Mellon, Citigroup, Goldman Sachs, J.P. Morgan Chase, Merrill Lynch, Morgan Stanley, State Street, and Wells Fargo.

According to the letter, public filings indicate that these nine banks have spent or reserved $108 billion for employee compensation and bonuses in the first nine months of 2008. Waxman also referenced experts and news reports that have suggested that much of this compensation may come in year-end bonuses that would be significantly enhanced by the infusion of taxpayer funds into these banks. To assist the Committee’s investigation into the propriety of this compensation, Waxman requested that each of the banks provide the Committee, no later than November 10, with the following specific information: for each year from 2006 to 2008, broken down by salaries, bonuses (cash and equity), and benefits (a) the total and average compensation per employee, paid or projected to be paid; (b) the number of employees who were paid or are projected to be paid more than $500,000 in total compensation; (c) the total compensation paid or projected to be paid to the ten highest paid employees; (d) a description of reasons for the year-to-year changes in the amounts indicated in (a)-(c); and (e) documentation sufficient to show all policies governing the granting of bonuses to the groups of employees referenced in (a)-(c).

Following closely on Waxman’s heels, New York Attorney General Andrew Cuomo sent a letter today to the board of directors of each of the above-mentioned nine banks, requesting that they provide his office with information about the expected bonuses and compensation to be paid to their top executives. In his identical letters to each of the banks, Cuomo requests that a “detailed accounting” of expected compensation to top management in the upcoming bonus season be provided, including all information regarding each bank’s bonus pool for this year, “both prior to and after [the firm] understood that the firm would be a recipient of taxpayer funds pursuant to the Troubled Asset Relief Program (TARP).” Cuomo requested that each of the banks provide, no later than November 5, the following specific information: a description of all bonus pools anticipated this year, including a description of the process by which the pools are established, and will be allocated and distributed; any documentation reflecting discussions involving pool allocation and distribution; a description of how, if at all, the calculation of the bonus pools has changed as a result of the bank receiving TARP funds; and a description of the bonuses awarded to employees receiving more than $250,000 in compensation for the years 2006 and 2007.

Referencing his investigation into the executive compensation practices at AIG, Cuomo states that now that the “American taxpayer has provided substantial funds” to each bank, the preservation of those funds is a vital obligation of each bank, and the “boards of directors must step up to the plate and prevent wasteful expenditures of corporate funds on outsized executive bonuses and other unjustified compensation.”