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JULY 30, 2009, 4:54 P.M. ET
Several large, troubled banks that got U.S. government assistance paid hundreds of employees bonuses of at least $1 million last year, according to New York Attorney General Andrew Cuomo.
J.P. Morgan Chase & Co. topped the list of banks that gave large bonuses, with 1,626 people receiving $1 million or more, including more than 200 people getting at least a $3 million payment. Goldman Sachs Group Inc., which employs less than a seventh of the number that J.P. Morgan does, paid 953 people bonuses of $1 million or more, including 212 of them who received $3 million or more.
Mr. Cuomo released the data in a report that criticized banks for continuing to pay hefty bonuses, intended to reward good performance, when the banks were reporting large losses or profit declines during the financial crisis. As such, the report could fan public indignation over bonuses paid on Wall Street.
The report provides a rare, numbers-based glimpse into the secretive world of bonuses being paid by major banks. Shortly after its release Thursday, employees of major Wall Street companies were comparing notes about which companies paid the greatest number of large bonuses.
Wall Street companies often allocate as much as half of the revenue of certain units to pay bonuses to top-performing employees. Some of the banks that took money from the U.S. Treasury Department's Troubled Asset Relief Program have wanted to pay it back as soon as possible, largely because of restrictions put on compensation that came with the funds. Some of the banks faced an exodus of key employees who left to work for other companies not subject to pay restrictions, and not in the same spotlight of public anger over pay.
Banks argue that they need to pay large bonuses to retain top professionals. Top talent keeps these firms going, said Jeanne Branthover, head of the global financial services practice at Boyden Global Executive Search. "Human capital is now more important than ever," she said.
Some banks, such as Bank of America Corp. and Citigroup Inc., haven't yet repaid their TARP investments.
Mr. Cuomo said his office has been investigating compensation at many of the banks, including the original nine that took TARP funds, over the past nine months. The study refers to 2008 bonuses -- those that would have been given before any of the banks repaid their government bailout money.
"At many banks ... compensation and benefits steadily increased during the bull-market years between 2003 and 2006," Mr. Cuomo's office said. "However, when the subprime crisis emerged in 2007, followed by the current recession, compensation and benefits stayed at bull-market levels even though bank performance plummeted."
The reports said two of the first nine TARP recipients -- Citigroup and Merrill Lynch -- suffered huge losses of more than $27 billion apiece last year. Citigroup got $45 billion from TARP, while Merrill received $10 billion, but they paid out more than $5.3 billion and $3.6 billion in bonuses, respectively.
At Citigroup, 738 employees got bonuses of $1 million or more, including 124 who received bonuses of $3 million or more. At Merrill, which was bought by Bank of America, 696 employees got $1 million or more, including 101 who received $3 million or more in bonuses.
Bank of America paid 172 employees bonuses of $1 million or more, including 28 who received $3 million or more.
Other banks, such as Goldman Sachs, Morgan Stanley and J.P. Morgan, paid out more in bonuses than their profit for the year, Mr. Cuomo's office said. Goldman Sachs, for example, earned $2.3 billion, paid out $4.8 billion in bonuses and received $10 billion in TARP funding.
Morgan Stanley, Goldman Sachs and J.P. Morgan declined to comment on the report. Citigroup didn't immediately return a phone call seeking comment.
The smallest number of big bonuses on the report's list of nine banks was paid by State Street Corp., which paid 44 employees a bonus of $1 million or more.
Bonuses have become a source of contention. At American International Group Inc., executives in one division were set to get bonuses totaling $165 million, despite the insurance giant's federal bailout and massive losses. Chief Executive Edward Liddy and other executives received death threats over the issue, and in a March congressional hearing Mr. Liddy said he was concerned about the safety of AIG employees. Some employees decided to return the bonuses.
Mr. Cuomo's office said, in some ways, large bonuses became an expectation at banks and a source of competition among them. At some banks, including Merrill Lynch, Mr. Cuomo said, the company "severed the tie between paying based on performance and set its bonus pool based on what it expected its competitors would do."
A person close to Mr. Cuomo said the attorney general "decided not to release the names of individual bonus recipients after weighing the public's right to know with the personal privacy interest of the individuals involved."