Andrew Cuomo wants to know how much money Wall Street is going to pay itself this year.  His ostensible reason is that bonus payments “worth more than the services provided” might violate the law.  It’s hard to find the right metaphor for this bit of interventionism, if that’s what it can be called.  But clearly we’re not in Kansas anymore.  It’s not evident what Cuomo’s legal argument will be that puts the law on his side on this one.  Perhaps it was no more compelling that Spitzer’s theory of the law when he went after Grasso’s compensation – a case he ultimately lost, or rather Cuomo himself decided to drop.  Cuomo appears to believe, however, that because the targeted companies and executives (Bank of America, Bank of New York Mellon, Citigroup, Goldman Sachs, JPMorgan Chase, Merrill Lynch, Morgan Stanley, State Street and Wells Fargo) all got government money to shore up their capital bases, taxpayers are therefore like shareholders, and a duty is now owed to all those Joe the Plumbers to do the right, and legal, thing when it comes to rewarding management.  We’re not sure what yardstick he will use to determine just what the value is of services rendered by these bankers.  Whatever he proposes, we’re certain it will be contested, which then puts the banks in the very uncomfortable position of revealing just how they calculate bonus levels – something they’ve never had to do.

This will not end well for anyone.  Seen through Cuomo’s frame, no amount of incentive compensation earned by senior Wall Street executives this year will be defensible – nothing except perhaps zero.  (Let alone the precedent this sets for measuring whether or not that compensation is truly “earned” in the future during good years, whatever that means.)  What possible argument could a Jamie Dimon make for getting his tens of millions of dollars that would convince Joe, or Jane, Taxpayer that he deserves it? 

Similarly, this will not end up well for Cuomo.  Our fear about Cuomo is that he’s just another Eliot Spitzer in sheep’s clothing; that his real agenda is to use the office, and powers, of the attorney general to pave his way to the governorship.  The flip side of this mutual no-win, zero-sum gambit on his part is that, depending on how much the banks fight back (a situation rife with reputational risks, to be sure), and how hard he goes after them, he’ll be seen as perverting the law to advance not just a political agenda but a personal one: that this is more about Andrew than it is the public interest, which is precisely where we ended up with Spitzer. 

This entry was posted on Thursday, October 30th, 2008 at 12:56 pm and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.