New York AG Probing Bank Exec Payouts

New York State Attorney General Andrew Cuomo is turning his scrutiny of Wall Street to a new area of focus -- executive compensation at the largest banks receiving equity injections from the U.S. Treasury.

Cuomo's office sent letters on Wednesday to nine of the largest banks to have received preferred equity investments from the government through the Troubled Asset Relief Program, or TARP. The attorney general is asking the firms to disclose information regarding expected bonus payments to senior management "both prior to and after you understood that the firm would be a recipient of taxpayer funds," according to a letter to Citigroup (C) linked on Cuomo's Web site.

"Obviously, we will have grave concerns if your expected bonus pool has increased in any way as a result of your receipt or expected receipt of taxpayer funds from TARP," the letter said.

Cuomo is also asking the companies to explain what mechanisms they have put in place to protect taxpayer funds.

"In this new era of corporate responsibility we are entering, boards of directors must step up to the plate and prevent wasteful expenditures of corporate funds on outsized executive bonuses and other unjustified compensation," the letter said. "Taxpayers are in many ways, now like shareholders of your company, and your firm has a responsibility to them."

The U.S. Treasury announced earlier this month that it was using $250 billion of the $700 billion TARP initiative to inject capital into ailing banks. The investments come in the form of preferred equity stakes that help boost the banks' as Tier-1 capital.