You know that bank, Merrill Lynch, that needed all those bailouts before being bought by Bank of America (the bank, not the sarcastic description of the Federal Reserve and the Treasury)? And that needed additional federal guarantees just to have the sale completed? Well, they did such a great job running their bank into the ground at taxpayers’ expense that they’re getting early bonuses!!
At the Getting-Nakeder-and-Nakeder-Naked Capitalism where she excerpts from a Financial Times article:
“Let us remember the fact set: Merrill managed to get Bank of America to agree to buy it in September, elbowing aside Lehman. The deal is subject to shareholder approval, however. BofA, realizing it has acquired a garbage barge, threatens to scuttle the deal unless Uncle Sam lends a helping hand. Negotiations proceed behind closed doors (and neither Merrill nor BofA shareholders are told prior to the shareholder vote that BofA has agreed to do the deal subject to some form of government support).
Now we learn that after it was evident that the US taxpayer was going to subsidize the Merrill acquisition, the Merrill compensation committee accelerated bonus payments by a month to make sure they were paid out before the BofA deal closed.
…
Were Merrill bankrupt, the bonus payments could be deemed fraudulent conveyance and clawed back. But we don’t do either financial firm bankruptcies or clawbacks in this country.”
Awesome! And what does Merrill Lynch’s John Thain have to do with any of this?
See this Bloomberg article linked to at Some Assembly Required:
“John Thain, who engineered the sale of 95-year-old Merrill Lynch & Co. to Bank of America Corp. in September, was ousted after Merrill’s $15.4 billion loss forced the lender to seek more money from the U.S. government.
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Thain negotiated the sale with Bank of America Chief Executive Officer Kenneth Lewis, 61, whose credibility was undercut when the brokerage reported a record fourth-quarter deficit. Lewis, who considered backing out of the deal when he learned of the extent of Merrill’s losses last month, went ahead at the insistence of U.S. regulators who provided a new $138 billion aid package
While Thain agreed to forgo a bonus for 2008, New York Attorney General Andrew Cuomo is investigating bonuses paid to Merrill executives in late December, just before the deal closed, a person familiar with the probe said. Merrill normally paid bonuses in January or February.
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Last month, Cuomo said a performance bonus for Merrill’s CEO and other top executives would be an “oxymoron” during such an “abysmal year.” Thain received a salary of $750,000 last year, according to Merrill’s securities filings.”
Cuomo is a bit old-fashioned in his analysis. He seems to think bonuses should be based on the bank’s profits. Youngsters like myself who grew up in this new environment of not-nationalized-but-the-taxpayers-will-take-those-losses-for-you banks know that bonuses are based upon how much taxpayer money you steal. And Thain’s dick move of steering his bank into an iceberg, taking free money not to pull the throttle, getting the government to pressure Bank of America to buy Merrill at a ridiculous share price, and then running his bank into the iceberg anyways (and admitting that there are several iceberg-sized holes in the hull already) so that the government has to pony up even more money is worth every dollar in bonuses he’s getting and some.
But I’m sure this high-profile and unadulterated larceny will be the last. Right? … Right?
Again, let’s ask Naked Capitalism:
“But is this move a sign of a sea change in attitudes towards CEO and senior level prerogatives? Sadly, I doubt it. Yes, the worst excesses may be reined in, but so much unjustifiable behavior came to be seen as acceptable by boards (with compensation consultants providing a paper trail to boot) that it will take a long time to effect more fundamental change. Did anyone object to Sandy Weill putting working fireplaces into his offices (a vastly greater expense than Thain’s decorating?) Did GE shareholders know of all of Jack Welch’s perks until they came out in his divorce?”
We are going to run out of outrage long before we run out of money.
… and the cow goes moo
For more on corporate and executive largess, and the shareholder/taxpayer expense, you might consider reading David Cay Johnston’s book, ‘Perfectly Legal: The Covert Campaign to Rig Our Tax System to Benefit the Super Rich – and Cheat Everybody Else”
http://www.amazon.com/Perfectly-Legal-Campaign-Benefit-Everybody/dp/1591840198/ref=sr_1_1?ie=UTF8&s=books&qid=1232732285&sr=8-1
It’s an awfully conspiratorial title, but its great for fueling the outrage. Lots of charts. Lots of boring tax facts that make sense of GM, Chrysler, and Ford executives flying around in corporate planes while their companies crash and burn (hint: it has to do with taxpayer and shareholder subsidized untaxed extra compensation for the executives). There’s also a fair bit about Jack Welch and his adultery-inspired divorce that brought much of the under-the-table compensation to light, albeit to little avail.
And btw, it really didn’t take long. Somewhere between writing that post and writing this comment, I spent my last outrage. I’m not even angry at John Thain or Merrill Lynch’s compensation board. Or anybody. But by some measures, I guess we ran out of money a long time ago.
… the metacow