Cuomo's Findings on Banker Pay Are No Smoking Gun - 31 July 2009
Cuomo's Findings on Banker Pay Are No Smoking Gun
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July 31st, 2009 @ 11:59 am
New York Attorney General Andrew Cuomo says he’s got the smoking data proving that bankers’ comp is out of whack.
In a nutshell, he concludes: “When the banks did well, their employees
were paid well. When the banks did poorly, their employees were paid
well. And when the banks did very poorly, they were bailed out by
taxpayers and their employees were still paid well. Bonuses and overall
compensation did not vary significantly as profits diminished.”
Predictably, reactions are all over the map. You’ve got your righteous indignation, your knee-jerk defense of Wall Street, and even the odd, and in my view more sensible, cautionary note that figuring out how to properly incent financial pros is harder than it looks.
There’s no doubt that pay in the financial world bears little
relationship to performance. We’ve known that for a while now. The real
question is whether excessive pay drives bankers, CEOs and their
corporate kin to take foolish risks. Despite the huffing and puffing in Cuomo’s report,
there’s little proof that it does. Corporate executives act recklessly
for many reasons. Greed is one of them, stupidity another. But simple
misjudgment in the face of daunting complexity — the fog of war — also
plays a major role. And as the Times’
Floyd Norris points out, there’s even some reason to think that the
nefarious effects of outsized financial bonuses are overblown.
Perhaps. But financial incentives do have some effect. Otherwise,
companies wouldn’t dangle these carrots before top executives. And on
this score at least one reality is emerging from the haze: Seeking
more...http://industry.bnet.com/financial-services/10001869/cuomos-findings-on-banker-pay-are-no-smoking-gun/
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By ZEKE MILLER And ERIC GERSHON
The Hartford Courant
August 2, 2009
Connecticut's Bonus
Beyond Outrage, Wall Street Payouts Fuel Connecticut's Economy, Tax Debate
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Connecticut's Bonus
Beyond Outrage, Wall Street Payouts Fuel Connecticut's Economy, Tax Debate
Big Paydays At Rescued Banks
Five months after the national flap over AIG,
outrage over Wall Street bonuses is back, and this time the stakes in
Connecticut — for taxes and for economic health — are much higher.
Nearly 5,000 employees working for the nine large banks that accepted
$175 billion in federal bailout money got million-dollar bonuses last
year. In all, the banks handed out $32.6 billion in "performance-based"
bonuses, New York Attorney General Andrew Cuomo disclosed Thursday in a
report.
The payouts renewed angry calls for government controls on bonuses and prompted an immediate vote by the U.S. House for such controls — in a bill that would also give shareholders the right to nonbinding votes on executive pay.
In Connecticut, though, the debate takes on special meaning. It provides fodder for Democrats in the General Assembly as they try to push through a tax increase on the highest wage earners.
And even as the payments offend popular concepts of fairness, the
billions in broader Wall Street bonuses are a financial boon to the
state — much more than AIG's disputed $218 million paid to employees at
a Wilton-based office of the failed insurance giant.
There is no public data showing how much of the nine big banks' bonus money went to Connecticut residents on the Fairfield County Gold Coast and elsewhere. But by all accounts the figure is large, and it boosts the state's coffers as well as its overall wealth.
"At minimum, we are talking $100 million for the state budget from
direct income tax, let alone indirect spending by those receiving
bonuses," said Peter Gioia, vice president for research at the Connecticut Business and Industry Association. "That may upset some people as taxpayers, but it should put a smile on people who own businesses."
The $100 million estimate assumes that the nine banks paid out about $2
billion of the $36 billion to Connecticut residents, based on the
current state tax rate.
Whatever the right number, said Nicholas S. Perna, economic adviser for
Webster Bank, "If Mr. Cuomo had been successful in banning all bonuses,
the state budget would have been in even greater trouble."
Meanwhile, Democrats at the state Capitol have said for many months
that the state should fill its two-year, $8.6 billion budget gap by
increasing the tax on high-income residents.
"I think this makes it harder for Republicans to claim that raising taxes by just $20 a week on those making $600,000 a year is excessive," said Senate President Pro Tem Donald E. Williams Jr.
What Is Fair?
As Gioia and Perna point out, the
so-called multiplier effect of the bonuses will help the state's
economy as a whole, not just the few who got the money, since it will
diffuse throughout the entire economy as it is spent.
But economic benefit is one thing and fairness is another.
more...http://www.courant.com/business/hc-wall-street-bonuses-connecti.artaug02,0,6464390.story