Fire Ken Lewis for the $3 Billion in Merrill Lynch Bonuses

/20 Comments/in , /by

I’ve been meaning to point to Andy Stern’s call to give Ken Lewis, CEO of Bank of America, the same treatment Obama gave Wagoner–the boot.

Both Rick Wagoner and Ken Lewis sunk large public companies — putting thousands out of work and toppling the American economy — while accepting billions in taxpayer bailouts. Yet only Wagoner got a pink slip. It’s time for Treasury Secretary Geithner to replace Ken Lewis as CEO and let real reform take hold at Bank of America.

And Change to Win’s petition calling to fire Lewis. 

But this tidbit–courtesy of Howie–will really make you want to oust Ken Lewis.

In its last days as an independent company, Merrill gave performance-based bonuses exclusively to employees earning $300,000 a year or more and holding a rank of vice president or higher, according to their financial statements. $3.62 billion was handed out to these executives – a sum equal to 36.2 percent of the $10 billion in taxpayer funds that were allocated to Merrill as part of the Troubled Asset Relief Program (TARP) before the bonuses were paid.

The company had been failing as a result of misadventures in the now infamous mortgaged-backed securities market which began crumbling with the decline of home values as the bubble burst.

The performance bonuses were determined by Merrill’s compensation committee on December 8, 2008, before Merrill revealed that it lost $15 billion in the final three months of 2008, unusual timing according to court documents filed by New York Attorney General Andrew Cuomo in an ongoing suit against Merrill’s former CEO.

In prior years, Merrill paid performance bonuses of this type after the end of the year, in January or February of the next year.

[snip]

The questionable timing and the amounts of these bonuses were not revealed to Bank of America shareholders when they voted to acquire Merrill. These facts raise questions about what government officials knew about the bonuses and when they knew it, according to Kucinich’s letter. 

$3.62 billion would keep all of GM in business for a month or two. But you and I are dumping that on a bunch of Merrill Lynch guys who brought down our finance system. 

image_print
20 replies
  1. klynn says:

    Like I wrote yesterday, I would prefer to bet my tax dollars on saving the auto industry and the auto industry supply chain over these irresponsible, greedy SOB’s.

    By the way EW, those execs, who got those bonuses, have been asked to go three months without pay right now…Wonder if that is PR?

    • Rayne says:

      Give me a million bucks and I’ll be glad to go without pay for 3 months.

      I’d spend 12 weeks on my yacht floating from port to port, wouldn’t even have to worry about the PR because they couldn’t find me.

      Gah. It’s so let-them-eat-cake-ish.

      • klynn says:

        I know. That’s why I shared the info. I thought it made the “planned” bonuses appear even more “in your face” to tax payers.

  4. phred says:

    Thanks for the post EW. I also read this morning that shareholders of AIG are working to oust the chairman of AIG’s compensation committee (via Reuters). I think it’s important that not only should CEOs (personally I think more of the executive staff should go, but CEOs are a good start) be removed, but the boards of directors should all go too.

  6. behindthefall says:

    I’d rather have seen that money go to paying off mortgages of people in trouble so as to keep them off the streets, out from under bridges, and out of “tent cities”.

    Quite an experiment we ran. “What would a society become if it decided to do nothing in accordance with the Golden Rule and as much as possible against it?” Now we know.

  8. klynn says:

    Quite an experiment we ran. “What would a society become if it decided to do nothing in accordance with the Golden Rule and as much as possible against it?” Now we know.

    Well, I think we are dealing with a new interpretation of the Golden Rule…We (high wealth network) get all the gold and you (little citizenry) get ruled.

  10. chrisc says:

    Tax them all. Seriously, I do not think of it as a punitive measure, but as a regulatory measure.
    Bush’s tax cuts opened the door to this whole mess. It was almost a race to see who could pillage the most.

  11. earlofhuntingdon says:

    Wall Street, like Washington, attracts an unusual percentage of predators that are normally more widely dispersed in the population.

    Wall Street makes a lot of money performing the necessary money changing that greases the economy’s wheels. It also makes enormous sums gaming weaknesses, whether in a target’s (or a client’s) finances, management, product portfolio. It is particularly adept at gaming weaknesses in rules, such as tax or corporate disclosure rules (the compliance end of the spectrum is for the non-predatory types).

    In the case of Merrill’s bonuses, they were obviously paid when insiders knew of the company’s financial peril. They paid themselves first, knowing the odds were low that even in bankruptcy they would not likely be made to pay them back. It was more likely, and has been proven in the case of AIG, that the umbrella purpose of “retention” bonuses would be an adequate fig leaf to cover their looting their own coffers to protect themselves. They need only stave off bankruptcy for a year to remove the threat that they would be clawed back.

    In a neighborhood, the dog usually gets the benefit of the “one bite” rule. Once its proven its viciousness, the next time it bites is the last. Will we do the same with these financial predators, who add far less value to the economy than their self-promotion claims to do, or is the only lesson history teaches is that we never learn from it?

  13. BMiller224 says:

    Ken Lewis in a Business Week interview with Maria Bartiromo 02/12/09:

    Are you worried about your job?

    I don’t have time to worry about my job. If somebody wants me to go, all they have to do is ask one time, and I’m gone.

    Andy Stern’s asked, so I assume ole Ken’s packing up his desk about now.

  14. readerOfTeaLeaves says:

    Just a note that Howie Klein wrote one of the most incisive analyses of modern ‘managerial capitalism’ that I’ve ever read.

    It was one of his earliest posts at “Down With Tyranny” and IMHO it is brilliant. Perhaps one day FDL would run it as a cross post…? IIRC, the title is “Who’s Going to Save Capitalism This Time?“

    It is the best synopsis of managerial capitalism that I’ve encountered, and covers some of the roots of the mess we’re in along with the dynamics that drove it off the rails.

  15. readerOfTeaLeaves says:

    EW and bmaz (and all), please forgive somewhat lengthy comment from NYT article on Cerberus.

    It is worth noting that pension funds in red states — of public employees! — may well have been called upon by Cerberus to help toss in $$$ last summer at a time when the economy was tanking and Chrysler was sinking under the $20 b-b-billion dollar debt load that Cerberus had placed it under.

    So two questions;
    1. When is the SEIU and the UAW going to start educating us all about the looting ways of hedge funds, including letting us all know how they first loaded companies with debt AND THEN looted the public pension funds to help save those debt-laden companies, and

    2. When do we start adding the names of hedge funders — John Snow, Dan Quayle, Stephen Feinberg (Cerberus) to Ken Lewis’s? Oh, I would so dearly love to believe that some very smart, tough FBI types were ‘interviewing’ these cads… (yeah, I’m a dreamer…)

    http://www.nytimes.com/2009/04…..berus.html

    But Mr. Feinberg did not go quietly. He also discussed additional federal money to help his other wayward investments in Detroit: GMAC and Chrysler Financial. Cerberus is now pushing the government to help orchestrate a merger of the two auto financing companies — a move that might eventually yield a profit for Cerberus.

    Cerberus persuaded some of the most prominent names in the financial world to join it in its Chrysler and GMAC investments. Its co-investors in those include the investment arm of Abu Dhabi as well as hedge funds like York Capital. Some hedge funds, like Eton Park, invested only in GMAC, but they, too, are feeling the pain….

    But Cerberus, like many private equity firms, loaded its new ward with what turned out to be crippling amounts of debt. Cerberus piled about $20 billion of debt onto Chrysler, Mr. Gabbert said. As car sales plunged across the industry — and, in particular, at Chrysler — the carmaker began to buckle under its load.

    Cerberus is also pushing the Treasury and the Justice Departments for support of its goal to merge GMAC and Chrysler Financial…

    Cerberus’s investors in the Chrysler deal include pension funds for public employees in Indiana and for public school employees in Pennsylvania, according to PitchBook.

    The main path of hope for Cerberus depends on government support for Chrysler Financial, which Cerberus split into a separate company from the automaker. Regulators informally rejected its request to become a bank holding company late last year, even while approving an application for such a conversion by GMAC. Political rancor related to Cerberus contributed to that decision by regulators, according to one of the people briefed on the situation. Now Cerberus is pushing the new administration to reconsider.

Comments are closed.