Scrutiny of Wall Street bonus plans

New York attorney general Andrew Cuomo is investigating whether Wall Street’s compensation practices were “illegal fraudulent conveyances” (PDF, 2 pages) and appears determined to prevent the use of taxpayer bailout funds for bonus payments.

I wonder, though, how he could conclude anything but that taxpayer funds will be used for the bonus pool. Consider this excerpt from this morning’s report on the matter by The New York Times:

Mr. Cuomo added that he would closely examine the books of the nation’s biggest banks to ensure that no government money went into bonus pools.

Money is fungible. If, say, Morgan Stanley receives $25 billion from taxpayers and pays out $10 billion in bonuses, to some extent or another, the taxpayer funds were a source of funds for the bonuses. It could be no other way.

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