Andrew Cuomo's bonus crime sheet

Looks like New York's tenacious attorney general Andrew Cuomo has blown a gaping hole in the latest line of defence used by desperate bank chiefs to shore up bonus pools: ie that the bonus culture also rewards the blameless army of humble branch and back office staff who work hard day-in, day-out to keep the backing industry ticking over.

The argument has been advanced most recently in the UK by apologists for the Royal Bank of Scotland over its plans to draw down a £1 billion staff bonus pool. In the US, Wells Fargo has tried a similar tact in a spectacularly bone-headed $200,000 ad campaign that attempted to justify its recently cancelled Las Vegas rewards junket for bank loan officers.

This specious special pleading will not wash anymore.

In a letter sent to US House Financial Services Chairman Barney Frank, Cuomo has laid out details of his investigation into the $3.6 billion in bonuses awarded to Merrill Lynch staff in December.

Some analysts had claimed that individual bonuses were actually quite modest and thus legitimate because dividing the $3.6 billion over thousands upon thousands of employees results in relatively small amounts estimated at approximately $91,000 per employee.

In fact, says Cuomo, Merrill chose to do the opposite. While more than 39,000 Merrill employees received bonuses from the pool, the vast majority of these funds were disproportionately distributed to a small number of individuals.

Indeed Merrill chose to make millionaires out of a select group of 700 employees and awarded an even smaller group of top executives "what can only be described as gigantic bonuses".

You can read the full crime sheet here.

It's another nail in the coffin for the banking industry old guard, as day-by-day the steady erosion of trust in the financial markets continues.

The root cause of the ongoing lockdown in financial markets is lack of trust. Banks not trusting their counterparties is one thing. But when the rest of the world no longer trusts its banks then we've all got a problem.