By Ian Swanson - 07/30/09 03:35 PM EDT
The report, from New York Attorney General Andrew Cuomo's office, found that two bailed-out institutions, Citigroup and Merrill Lynch, suffered about $27 billion in combined losses last year but still paid out nearly $9 billion in bonuses. The two companies received $55 billion in money through the Troubled Asset Relief Program, according to the report.
Cuomo's report concludes that "even a cursory examination of data suggests that in these challenging economic times, compensation for bank employees has become unmoored from banks' financial performance."
The report said compensation packages should be designed to promote long-term, sustainable growth.
In a letter to Cuomo on Thursday, House Oversight and Government Reform Committee Chairman Edolphus Towns (D-N.Y.) said he agreed with the report's conclusions, adding that they matched what congressional investigations have discovered.
He said executive compensation policies at companies that were bailed out by the government were a "major driver of risky decisions" that led directly to the financial crisis, and invited Cuomo to testify at the September hearing along with Ken Feinberg, the Obama administration's executive pay "czar."
Cuomo's report said private firms should better police executive pay, and warned that if they do not, the government should step in:
"If the private sector does not act, such reform should be discussed as part of the federal regulatory reform effort and, where appropriate, taken into account by the Obama administration's pay czar."
Congress flirted with passing legislation earlier this year that would have tried to claw back bonuses paid to employees of AIG, an insurer at the heart of the financial crisis. The House approved legislation to tax those bonuses, but the bill died in the Senate.
The House is moving forward with legislation that would give shareholders an annual vote on executive pay, but that bill would not place any limits on such pay.
Towns said Cuomo's report on executive pay at companies receiving taxpayer bailouts was "shocking and appalling."
"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 release.
"This egregious behavior proves that Wall Street still doesn't get that times have changed and the old way of paying executives is long gone."
He also offered a full endorsement of Cuomo's conclusion that "there is no rhyme or reason to executive pay — it had no relation to executive performance, no relation to managing risk and no relation to company performance."