Thursday, January 22, 2009

Thain and Montag to Leave Merrill Amid Bonus Controversy

The Financial Times reported this morning that Merrill accelerated bonus payments by a month, doling out billions in compensation just three days before stuffing Bank of America with a huge loss.  Here's a quick timeline just as a refresher:
  • December 5th - Shareholders of both banks approve merger.
  • December 8th - Merrill's comp committee approves accelerated bonuses.
  • December 29th - Bonuses paid to Merrill employees
  • January 1, 2009 - Merrill/BofA deal closes.
  • January 20th, 2009 - Reports confirm that Merrill had a $21.5 billion operating loss in the fourth quarter and the government provided BofA with additional funds plus a massive guarantee on over $100 billion in Merrill's garbage.
I'm a little fuzzy on what happened between December 8th and December 29th.  At some point Ken Lewis discovered the loss, informed the government that he wouldn't go through with the purchase, and received a bailout to close the deal and avert a possible collapse of the financial markets.  In between all the negotiating, you'd think that Mr. Lewis could've found some time to issue a stop payment on all the bonus checks.  Clearly, somebody somewhere should've issued a stop payment.  Obviously, Mr. Thain was not in a position to do so because, well, he's either criminally insane or just a criminal.  But holding a special board meeting to accelerate bonus payments right before you inform your acquirer that it's gonna need a bailout from the government because you happened to puke yet another $15 to $25 billion or so is inappropriate, as well as, perhaps, fraudulent?  I don't know.  I'm struggling to find the right words.
In any event, Mr. Thain, who up until this morning faced a bright future at BofA, has been asked to leave.  Mr. Montag, the man who pocketed $40 million just for showing up for four months of work last year, is also being shown the door.  No word yet on their severance packages, but I'm thinking $50 million a piece ought to do it.  Right?

Update:  Tom Montag is not leaving Bank of America as I initially erroneously reported.  He will continue to run Global Markets (into the dirt) and report directly to Ken Lewis.  Apologies for the confusion.


Joshua said...

The funny thing is how late Wednesday people suddenly decided to buy bank stocks because word leaked out that Ken "Countrywide" Lewis was buying more of his stock. Needless to say, I nearly hurt my back trying to sell any bank stocks I owned.

Anonymous said...

God, and you thought the fradulent greed wasn't over yet. Sorry to say, I hope Karma follows these especially greedy fools to their grave. Maybe one day in the not too distant future some kid who is the product of all this financial mess will rob one of these executives for pocket change and bust a cap in their a**es, ...and get away with it... since the Police are cutting back due to local gov budget crisis.

Mr Wrightwood said...

On CNBC yesterday, Melissa Francis was defending Thain as having done the right thing by getting the most money for MER shareholders. How do public figures get so confused about right and wrong? Is the Wall St. culture that rotten and corrupt? Wait, don't answer that.