IMPEACH BUSH

Congressional investigators yesterday demanded that the nation's nine largest banks prove they are not using an emergency infusion of $125 billion in taxpayer funds to lavish their executives with wealthy bonuses.

Rep. Henry A. Waxman (D-Calif.), chairman of the House Committee on Oversight and Government Reform, noted that before the infusion, the banks had spent or allocated $108 billion on employee compensation and bonuses for the first nine months of 2008, nearly the same amount as last year.

"I question the appropriateness of depleting the capital that taxpayers just injected into the banks through the payment of billions of dollars in bonuses, especially after one of the financial industry's worst years on record," Waxman wrote in a letter to the banks.

Lawmakers across the political spectrum want to ensure that the government's bailout program results in increased lending, not bigger paydays for executives.

Banking industry officials said they fully intend to use money from the government's bailout program to make loans and increase liquidity. They noted that bonuses are a normal part of compensation packages. The fact that the allocations on compensation so far in 2008 are identical to last year suggests that the bailout money will be not used to boost bonuses, they said.

"Waxman's barking up the wrong tree," said Scott E. Talbott, senior vice president of government affairs for the Financial Services Roundtable, which represents the nation's most powerful banks, brokerages and insurers. "We reject his basic premise. The institutions fully intend to use the money to start making loans."

But a new study suggests that financiers are still bullish about their bonuses. More than two-thirds of Wall Street professionals are expecting a bonus this year, and 36 percent are anticipating a larger bonus than last year, according to a survey by eFinancialCareers, a career networking company.

"Some experts have suggested that a significant percentage of this compensation could come in year-end bonuses and that the size of the bonuses will be significantly enhanced as a result of the infusion of taxpayer funds," Waxman said.

In his letter to the banks, Waxman asked them to provide detailed data on compensation packages since 2006, as well as the projected salaries and bonuses for the rest of the year. The request was sent to Bank of America, Bank of New York Mellon, Citigroup, Goldman Sachs, J.P. Morgan Chase, Merrill Lynch, Morgan Stanley, State Street, and Wells Fargo.

The Treasury Department has so far pledged $163 billion to 30 financial institutions out of $250 billion allocated for capital investments. The money has gone to the nation's largest banks and just a few smaller banks, such as Saigon National Bank of California, which will get $1.2 million.

The Bush administration's approach has been relatively inclusive, granting funding to nearly all of the nation's largest banks. The only two exceptions among the 20 largest banks are National City, which was forced to sell itself, and U.S. Bancorp, regarded by analysts as perhaps the healthiest of the major banks.

Treasury officials also continue to work on legal arrangements that would allow thousands of the nation's smallest banks to take government investments. Many community banks are basically private partnerships that lack the ability to issue preferred shares to the government in return for capital.

Frederick Cannon, a banking analyst at Keefe, Bruyette & Woods, a New York investment bank, said demand for the investments appeared strong.

"It's cheap capital for a capital-starved industry," Cannon said. "I think most banks are asking themselves, 'Why shouldn't I take it?' "

The Bush administration yesterday stepped up its insistence that the banks not hoard the funds.

"What we're trying to do is get banks to do what they are supposed to do, which is support the system that we have in America," said White House press secretary Dana Perino. "Banks exist to lend money."

But regulators continue to make clear that they cannot force banks to increase lending. They have said some banks should use the money for other purposes, such as acquisitions. Some banks, for their part, have said that they intend to hold on to the money.

When First Horizon, a Tennessee bank, got $866 million in government investment on Monday, it said the money "adds to its already substantial cushion against the adverse effects of the weakening economy."