Former Merrill CEO Out At Bank America

John Thain Allegedly Rushed Out Billions In Bonuses As Company Pleaded For Federal Bailout Cash

(AP)  John Thain resigned under pressure from Bank of America on Thursday after reports he rushed out billions of dollars in bonuses to Merrill Lynch employees in his final days as CEO there, while the brokerage was suffering huge losses and just before Bank of America took it over.

The bonuses were paid before Bank of America's acquisition of Merrill became final on Jan. 1, and while Bank of America was privately telling the government that Merrill was losing so much money that the deal might fall through unless it could get more federal bailout money.

Bank of America later received an additional $20 billion from the government, in part to offset the unexpected Merrill losses. The brokerage lost $15 billion in the fourth quarter and more than $27 billion for the year.

The bonuses, typically paid in January, were instead given in December and totaled $3 billion to $4 billion, the Financial Times reported Thursday. Bank of America would not confirm the size of the bonuses.

Scott Silvestri, a Bank of America spokesman, noted that Merrill was still operating as an independent company at the time the bonuses were paid. Had Thain not acted early, it would have been up to Bank of America to pay or reduce the bonuses later.

Bank of America CEO Kenneth Lewis flew to New York on Thursday to meet with Thain, and within hours the spokesman issued a terse statement saying the two had "mutually agreed that his situation was not working out and he would resign."

The government helped orchestrate the acquisition of Merrill by Bank of America over the same weekend in September that another investment bank, Lehman Brothers, went under, setting off the most intense period of the financial crisis.

The government also promised last week to guarantee about $97 billion in losses on Bank of America's troubled assets, most of it coming from Merrill Lynch.

Thain himself did not accept a bonus last year. Nor did four other top executives at Merrill: its president and chief operating officer, its president of global wealth management, its chief financial officer and its general counsel.

Thain, 53, is a former head of the New York Stock Exchange and a former chief operating officer of investment bank Goldman Sachs. He had been named head of a wealth management division of the merged businesses of Merrill and Bank of America.

In 2007, Thain topped the list of highest-paid CEOs in American business, with a compensation package valued at $83 million, according to an Associated Press analysis. That included a signing bonus and other enticements that helped lure him from the NYSE to lead Merrill.

New York Attorney General Andrew Cuomo has opened an investigation into the bonuses, a person familiar with the probe told The Associated Press on Thursday. The person spoke on condition of anonymity because the investigation is ongoing.

Silvestri said Lewis was aware of Thain's decision to grant the bonuses, and some analysts said the disclosure also increases pressure on Lewis.

Bank of America stock, which was already tumbling Thursday, fell further after reports of Thain's departure but later regained ground. It closed down 97 cents, or more than 14 percent, at $5.71.

Bank of America stock has been among the hardest hit in the financial sector. It has lost almost 60 percent of its value since the Merrill deal went through. The stock is down 85 percent from one year ago.

"From a shareholder standpoint, board standpoint, you would really have to question his judgment," said Jason O'Donnell, a bank analyst with Boenning & Scattergood Inc.

It is unclear who would replace Lewis as Bank of America CEO if he were ousted by the board of directors. Thain was rumored to be most likely to be Lewis' eventual successor, O'Donnell said.

"Clearly Lewis made a bad deal. Thain did a very good job in selling him on the prospects of Merrill," he said. "He needs to take responsibility for that transaction."

At the very least, the payment of bonuses indicates Thain was "completely tone-deaf to the culture of B of A," said Tony Plath, finance professor at the University of North Carolina at Charlotte.

"My surprise is the board gave him an opportunity to resign and didn't just fire him," he added.

A spokesman for Rep. Barney Frank, the Massachusetts Democrat who chairs the House Financial Services Committee, said Frank was "very disappointed to learn this news, and these banks are the toughest people in the world to try to help."

Sens. Johnny Isakson, R-Ga., and Kent Conrad, D-N.D., said at the Capitol that they were not familiar with the details of the situation but that it would be an outrage to award bonuses in advance while the brokerage firm was suffering big losses.

"If it's found to be true that people were taking huge bonuses while accepting government assistance or taking bonuses while their shareholders were taking huge losses, it's unconscionable in my judgment," Isakson said.

Some analysts expected Thain to leave soon anyway. When two huge companies link up, one of the CEOs from the standalone companies usually departs. Bank of America named its general counsel, Brian Moynihan, to replace Thain.

Bank of America has come under criticism for acquiring Merrill and its huge losses, and Lewis has spoken out in the past about his dislike of the investment banking business.

In October 2007, after Bank of America posted a 32 percent drop in third quarter profits, hurt heavily by investment banking results, Lewis said: "I've had all of the fun I can stand in investment banking at the moment. So to get bigger in it is not something I really want to do."

[lloydbest1]

"And the bickering HAS TO STOP. IT IS NOT A PARTISAN ISSUE. It''''s not about repugs or dems. Jeeeeeze. It''''s about scum balls on both sides of the isle! It''''s about corrupt business. please FORGET POLITICAL OFFILIATION! PLEEEEEASE!" Posted by mnelsonix at 04:01 PM : Jan 23, 2009
Then the Correction:
"affiliation.....sorry"

Nelson, in point of fact, "Offal"-iation might even be a better term yet. But you are quite correct that both sides of the aisle are complicit.

[gmancubfan]

10 REASONS WHY THAIN IS A LOSER: 1. He is all about himself. People who are all about themselves have no friends, just people sucking up to them for a share of their filthy moeny. 2. People like him tend to commit suicide when they lose their money because that is all they live for. 3. He will burn in hell and guess what - you can''t take the filthy money with you. 4. His poop stinks just like everyone else''s although he thinks gold bricks come out of his aaswhole. 5. Looking at his pasty face makes people throw up. 6. He spent 1.2 million redecorating his office when he could have donated it to the poor. 7. He is dishonest, a cheat, a liar, and a clod. 8. He suffers from small man syndrome 9. Everyone hates his guts even his wife and kids, 10. His own mother is sorry she conceived such an arrogant bag of ***.

[mnelsonix]

"The bonuses, typically paid in January, were instead given in December and totaled $3 billion to $4 billion, the Financial Times reported Thursday."

Posted by sepa2 at 02:17 PM
_______________
How can they legally pay these "Bonuses" when the share holders go broke? It can''t be legal.

[mnelsonix]

affiliation.....sorry

[mnelsonix]

And the bickering HAS TO STOP. IT IS NOT A PARTISAN ISSUE. It''s not about repugs or dems. Jeeeeeze. It''s about scum balls on both sides of the isle! It''s about corrupt business. please FORGET POLITICAL OFFILIATION! PLEEEEEASE!

[mnelsonix]

The collusion between our goverment watch dogs, and these bankrupt financial institutions, to raid our treasury, and leave our children in debt, can be contained through the use just one instrument..................................................................................................................................................................................................................................................................................the guillotine.

[dzemog1]

So if I remember the original story yesterday, it said that Thain made Lewis aware that he planned to move the bonuses up. If I read that correctly and Lewis WAS made aware of Thain''s plan, he needs to follow Thain out the door. The lack of integrity in the banking sector is truly astonishing to me, although I can''t say I''m all that surprised here. BofA has made a practice of swallowing up banks in it''s effort to be the biggest and baddest of them all. Add that to their less than ethical and questionnably illegal credit card program marketed specifically to illegal residents, and I think you have a pretty clear idea of what they''re all about. And now that their greed has come back to slap them in the face, they expect us to bail them out and look past the greedy practices that got them there. Lewis is no better than Thane, and he needs to get his marching papers too.

[sepa2]

"The bonuses, typically paid in January, were instead given in December and totaled $3 billion to $4 billion, the Financial Times reported Thursday."
No wonder any high achieving student is not choosing science or engineering leading careers which produce wealth and knowledge. With present kind of skewed salaries our future is doomed to "service economy"

[whitemale08]

A perfect example of Hank the Snake Paulson using Adam Smith''s invisible hand to stimulate the pockets of Bank of America.

The bailout was nothing but a classic looting operation from the ''banksters''.

[incog-nito]

Once again, it appears that the invisible hand of the "free market" is taking real good care of itself.

[bm6005]

I''ll be quite surprised if he''s around much longer. Time for a "permanent" vacation!

[bear-2009]

Eight years of de-regulations, lack of oversight and the Bush Administration leads any company or financial institution to failures and corruptions. I am sure Madoff hid billions of monies world wide.

[hsinco-2009]

I wish the government would give these guys a tropical vacation. I hear that there are about to be some vacancies at Guantanamo Bay. Paulson should be sent along with them...no charge him with treason and hang him. This is the biggest fraud ever perpetrated on the American public.

Posted by stupidrules3 at 07:02 AM : Jan 23, 2009

How about sending the Repugs that created this mess. Yes, from both Congress and the WH.

[mytoosense]

John Thain is the Post Child for Greedy Dic-Head.

[docpeter1953]

So what is Congress going to do about it?
These people stole tax dollars and should be punished.

Posted by kevinkkloste at 07:57 AM : Jan 23, 2009
______________

NO! NO! NO!

These people didn''t steal the $$ and give it to their faithful employees.

They gave their employees "retention pay" to the losers that helped drag their company into bankruptcy and ruin.

[docpeter1953]

From the above article, ''In 2007, Thain topped the list of highest-paid CEOs in American business, with a compensation package valued at $83 million, according to an Associated Press analysis. That included a signing bonus and other enticements that helped lure him from the NYSE to lead Merrill.''
________________

Geeze, I wish and pray that someone will pay me $83M to lead them into bankruptcy or foreclosure.

Dear Mr. Bill Gates
C.E.O., Microsoft Copr.,

Do I have a deal for you.....

[nibaru]

"WOW"!!!!!!!!!! how blatant can you get.

[lloydbest1]

"If you read the commnets, you can see more and more comments are sounding socialist/communist.. Well, so at least now people in the US understand what was the reason for communism --- utter corruption by the top elite.. Howver, unfotunately, communism also is not the answer because it still caused the same corruption just with a differenf face"
Posted by ecibu46 at 06:52 AM : Jan 23, 2009

People like John Thain, Rick Wagoner, Bernie Madoff, Kenny Lay and so on are the reasons why we also have people like Fidel Castro, Hugo Chavez and Evo Morales. Sad, isn''t it?

[stupidrules3]

I wish the government would give these guys a tropical vacation. I hear that there are about to be some vacancies at Guantanamo Bay. Paulson should be sent along with them...no charge him with treason and hang him. This is the biggest fraud ever perpetrated on the American public.

[ecibu46]

If you read the commnets, you can see more and more comments are sounding socialist/communist.. Well, so at least now people in the US understand what was the reason for communism --- utter corruption by the top elite.. Howver, unfotunately, communism also is not the answer because it still caused the same corruption just with a differenf face