Legal Commentary

The Prince of Regulation

By Tom Kirkendall

Get a load of the letter that New York Attorney General Andrew Cuomo, the new Prince of Regulation, sent to about ten Wall Street firms the other day:

We believe that the Board of Directors is most appropriately positioned to respond to our requests as the firm's top management likely has a significant interest in the size of the bonus pools. 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.

As my Office has told AIG, now that the American taxpayer has provided substantial funds to your firm, the preservation of those funds is a vital obligation of your company. Taxpayers are, in many ways, now like shareholders of your company, and your firm has a responsibility to them.

Accordingly, we also ask that the Board inform us of the policies, procedures, and protections the Board has instituted that will ensure Board review of all such company expenditures going forward. Please provide this Office with an accounting of the actions the Board plans to take that will protect taxpayer funds.

So, Cuomo charts the same political course as Eliot Spitzer before him and Rudy Giuliani before Spitzer. Embrace the Greed Narrative and then sit back and let the mainstream media do the rest. Before you know it, even both major presidential candidates tout the myth that business failure is always about dastardly villains and innocent victims.

My question for Cuomo and his mainstream media minions is quite simple: What is the likely quality of the management and board members who are willing to stick around and put up with Cuomo's grandstanding?

My bet is that you won't see many Hank Greenbergs.

Meanwhile, those less-than-stellar management teams all have tickets to feed at the Fed's money trough.

Ah, the webs we weave.

Full post as published by Houston's Clear Thinkers on October 31, 2008 (boomark / email).