Cuomo's Bonus Report

http://dealbook.blogs.nytimes.com/2009/07/30/cuom…

A few quick thoughts:

• ML bonus was for a large part, retention bonuses, which are ABSOLUTELY necessary in a merger of this nature. Without these bonuses and they retention agreements they produced, BofA probably wouldn't even have been willing to buy a ML which had people (and their client relationships) jumping ship left, right, and center. BofA can try to use the bonuses as a scapegoat to explain their sucking major D, but they know as well as anyone else, without those bonuses, that deal would probably not even have happened.

• If Cuomo is trying to show how the Comp-to-Performance correlation is completely out of whack, how about highlighting the top x compensated employees and quantifying their contribution to the bottom line, 1yr, 3yr, and 5yr. So if Bob the Banker generated 10M in fees this year and received 10M in bonus, theres a fucking problem. If he had a bad year, and generated $1M in fees, and still got a $3M bonus... I'd like to see that too, and I'd like to see what his track record is. Has he been consistently generating 10-20M a year in fees and getting a $7M bonus, indicating this is just an off year and the $3M bonus is significantly lower than his usual comp, probably just getting it to keep him around since he is a good earner for the firm? Is Tim the Trader losing millions of dollars while getting million dollar bonuses?

Cuomo doesn't want to present the report like this, for a variety of reasons. #1, its just so much gosh darn work to actually do research before publishing a research report. #2, his prerogative isn't to identify and/or correct a problem, if it exists. It could very well be a major problem, I don't refute this. But it could also be a very small issue that is being blown out of proportion. I can't really make that call without having seen an INTELLIGENT analysis, which the AG refuses to present, probably because its not as sensational.

While some may argue that actually quantifying an employees contribution could be impossible, for the few employees receiving such big bonuses, its probably quite simple. It could be hard to quantify Lloyd's contribution, but its much easier to quantify the contribution of the lead traders on the risk arb desk. Further, take bankers and identify which transactions they produced. In deals where this is not as apparent, allocate the revenue to the department and push down the the few heads of the departments. Obviously simplified, but my point is consultants could easily do something like this, its not rocket science.

Cuomo's real prerogative is to create public outrage, which gets him more recognition and helps propel his political career. He hopes to do this not with a factual, thought provoking analysis, but by duping the simple minded public into being outraged that someone who has -- spent the better part of their life working their ass off to get into Princeton, graduate at the top of his class, get a job with other people with similar accomplishments, and kick their asses -- is making a $3M bonus.

Most people have absolutely no fucking idea what a banker or trader does, and Cuomo doesn't want to tell them, or atleast monetarily quantify why they should or shouldn't be making what they are making. He just wants to create outrage/sticker shock for largely ignorant people.

• While the AG seems to be trumpeting the need for transparency, what they don't seem to be elaborating on is the fact that some institutions were being strong armed to taking TARP funds for the 'public good' of not making the other banks in need of TARP look bad. Ok, maybe this was a necessary step. But then what is the basis of Cuomo's criticism that they were in need of US Taxpayer money, but at the same time paying huge bonuses?

Id like to dip my foot in Vaseline and kick this guy right in the anus.