“Wall Street is still in transition, but is slowly adjusting to changes in its economic and regulatory environment,” the state CFO said in a Feb. 26 announcement. “Profits and bonuses rebounded in 2012, but the industry is still restructuring.”
New York Stock Exchange member firms reported total profits of $23.9 billion in 2012, marking a significant climb from 2011’s $7.7 billion earned.
Regulatory reforms have required larger reserves, limits on proprietary trading and “other changes intended to reduce unnecessary risk and to enhance transparency,” the Comptroller’s Office said, while noting that deferral bonuses are being implemented to assist with current compensation reforms.
DiNapoli noted that the securities industry has changed in Big Apple since the 2008 collapse, where the seven giant dominated the industry. But the Lehman Brothers’ bankruptcy and changes for Bear Stearns and Merrill Lynch translate into 10% fewer jobs in the City.
Other companies affected by the collapse include AIG, Ally, GM, Bank of America, Citigroup,Chrysler and Chrysler Financial. These companies were listed as receiving exceptional bailouts by the Treasury Department’s $700 billion Troubled Asset Relief Program (TARP).
In testimony offered today by Special Inspector General Christy Romero, from the Office of the Special Inspector General for the TARP (SIGTARP), she listed that Treasury and the Office of Special Master for TARP Executive Compensation (OSM) should take on additional provisions for executive pay proposals.
The testimony highlighted that “one lesson from this financial crisis is that regulators should take an active role in monitoring and regulating factors that could contribute to another financial crisis, including executive compensation that encourages excessive risk taking.”
She added in her comments at the Feb. 26 hearing of the U.S. House Committee on Oversight & Government Reform Subcommittee on Economic Growth, Job Creation & Regulatory Affairs that AIG CEO Robert Benmosche has indicated that OSM’s best practices for compensation will “have no lasting impact.”
“Given AIG’s considerable pushback on OSM’s limitations on pay as reported in SIGTARP’s prior report, it is likely that AIG could return to past compensation practices,” Romero stated. OSM’s authority over AIG pay provisions officially concluded in 2012.
On Dec. 14, 2012, the insurance giant said that it officially paid the U.S. Treasury Department the remaining shares from the bailout.
“We are proud to make America whole on its investment in AIG plus a substantial profit and grateful for the opportunity,” Benmosche said in the announcement. “Thank you America. Let’s bring on tomorrow.”
In a January report, the TARP inspector said the Treasury continued to approve executive pay amounting to packages of $3 million or more for 54% of Top 25 employee proposals from AIG, GM, and Ally, formerly General Motors Acceptance Corporation, Inc.
“Treasury seemingly set a floor, awarding 2012 total pay of at least $1 million for all but one person,” the previous report noted.
