The Ghost Of Eliot Ness: Cuomo Fights Bank Bonuses (GS)(C)(MS)(JPM)

Windmill_2_lgWall St. is a den of thieves and NY Attorney General Andrew Cuomo wants to wipe them out on his way to becoming governor like his father was before him. His latest attempt to get some time in the headlines is to ask nine financial firms to show him their lists of management bonuses before the checks are written.

Cuomo is after the banks which are getting money from the new Paulson bailout facility Why be believes he has any jurisdiction in the matter is pure conjecture.

According to The Wall Street Journal, “In separate letters Wednesday, Mr. Cuomo’s office requested a “detailed accounting” of expected payments to top management in the coming bonus season.” The missives went to the usual suspects at places like Goldman Sachs (GS), Citigroup (C), JP Morgan (JPM), and Morgan Stanley (MS). There was no one home at Bear Stearns or Lehman Brothers to sign for the letters.

Cuomo is asking whether any of these payments might be fraudulent conveyances. Perhaps banks which lose money should not give out bonuses, but that is a board fiduciary and shareholder rights issue. It is hard to imagine that all  of the blue chip boards of directors were peopled with dupes and morons. They had their say in approving payments. Stockholder advocates get to protest the levels of pay at annual meetings. Even though it does very little, the right represents an odd sort of democracy.

Between examining possible bad behavior by former governor Eliot Spitzer and getting financial firms to pay back the money for auction-rate securities, Cuomo may find that the SEC and big public company boards will take exception to his attempt to cut bonuses. The Treasury has the right to move in that direction based on a mandate from Congress.

Cuomo could try to get elected to a number of bank boards so his vote can be counted, but that would take too much time.

Douglas A McIntyre