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.
Half of the $250 billion will go the nine largest banks, including Bank of America ( BAC), Bank of New York Mellon ( BK), Citi, Goldman Sachs ( GS), JPMorgan Chase ( JPM), Merrill Lynch ( MER), Morgan Stanley ( MS), State Street ( STT) and Wells Fargo ( WFC). Those are the nine banks to receive letters Wednesday, according to Cuomo's Web site. As part of the restrictions in using the government-issued capital, banks will be required to scale back their executive compensation packages. Cuomo's request comes a day after Rep. Henry Waxman (D., Calif.) asked the CEOs of the nine large banks for similar information. Investors have been increasingly concerned about banks' capital levels as the economy worsens. This week several regional banks announced that they too would be taking part in the government's capital plan. One bank, The South Financial Group ( TSFG), saw its CEO retire early and take with him nearly $12 million paycheck, as it agreed to the government's capital injection plan. The banks have one week to comply with the request, Cuomo said.