The House Oversight and Government Reform Committee plans to probe the pay practices at the banks that have received the most government aid, spurred on by a new report from New York Attorney General Andrew Cuomo.
Rep. Edolphus Towns, D-N.Y., who chairs the panel, said it will hold a hearing after Congress' August recess featuring Cuomo and U.S. "pay czar" Kenneth Feinberg.
"Companies that only months ago were facing bankruptcy and sought the help of the federal government are now paying out billions in compensation — and in some cases without reimbursing taxpayers," Towns said in a statement.
Towns said the hearing is necessary in light of Cuomo's ongoing investigation of compensation practices at some of the largest banks that took money from the $700 billion Troubled Asset Relief Program. A report by Cuomo discussing the findings of his office said that compensation for bank employees "has become unmoored from the bank's financial performance."
"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," Cuomo said in the report.
The report singles out Citigroup Inc. and Merrill Lynch & Co., two of the original nine companies that accepted government aid last year. Though the firms each suffered losses of more than $27 billion, Citigroup and Merrill Lynch, which is now part of Bank of America Corp., paid out $5.33 billion and $3.6 billion in bonuses, respectively. In all Citi and Merrill received $55 billion in Tarp funds.
Some of the other companies, such as Goldman Sachs Group Inc., Morgan Stanley and JPMorgan Chase & Co., paid out more in bonuses than their profit for the year, Cuomo's office said.
The report could increase political pressure on the Obama administration to do more to ensure that firms that have been propped up by the government do not lavish top executives with outsize pay packages. Outrage from lawmakers and the public has forced the White House and Treasury Department to deal with the issue, and Feinberg is vetting compensation packages at some of the banks and industrial firms that received the largest bailouts.
The House is scheduled to vote today on a bill that would give shareholders more say on executive compensation packages at public companies, and would cull out financial firms for greater scrutiny of executive pay.