Being Bank of America and Merrill Lynch

Kenneth Lewis, CEO of Bank of America, and John Thain, former CEO of Merrill Lynch, are not new to this blog. I have written of both of them here before. Perhaps now justice will be served for the apparent unethical dealings that both of these men seemed to have been engaged in. According to the New York Times federal judge, Jed. S. Rakoff, "on Monday sharply criticized the bonuses that Merrill Lynch hurriedly paid out before it was acquired by Bank of America last year and pointedly questioned a federal settlement that had seemed to put the issue to rest."

Is it not high time that Wall Street be held accountable for its unethical business practices with the money taxpayers gave them which was used to pay out big executive bonuses of $3.6 billion? Obviously Judge Rakoff thought so. He "was scathing about the settlement, in which the S.E.C. accused Bank of America of misleading its shareholders...Bank of America and Merrill Lynch...'effectively lied to their shareholders.' The $3.6 billion in bonuses paid by Merrill as the ailing brokerage giant was taken over by the bank was effectively 'from Uncle Sam.'"

Congress and the American people spoke out against the bonuses. But is Congress not culpable? Why didn't they restrict these bonuses before a bailout was given or the acquisition by Bank of America allowed? Merrill Lynch "lost $27 billion dollars" the year before the bonuses and bailout were given. By the way, Bank of America made off like bandits with two portions instead of one of the multi-billion dollar bailout at low government interest rate while not changing the interest rates of its customers. The yield curve is great.

Instead of limiting bonuses, we heard a lot about the important of maintaining previous contracts, as if as without a bailout and merger Merrill Lynch such contracts would have even been significant. With such loses, Merrill Lynch would have been no more. Plus, who gets a bonus in the real world for bankrupting their company? Judge Rakoff asked a very pertinent question. "Do Wall Street people expect to be paid large bonuses in years when their company lost $27 billion?"

Being John Thain III

Reuters has just reported that John Thain has been subpoenaed by the New York Attorney General over Merrill Lynch bonuses before the takeover by Bank of America last year. Let's see how this story ends. Do you think it will end justly?

Being John Thain II

Mr. Thain offered some lame excuse for why his office was redecorated last year to the tune of $1.22 million citing that the financial crisis was not as bad at the time. He also intimated that this is just what they do.

In his contrition Thain failed to mention the $2 billion to $3 billion dollars in employee bonuses while Merrill lynch was reporting loses last year. Yes, he said that he was "sorry" and would pay back the $1.22 million (mere chump change for this guy) for the redecoration costs. Is that enough?

Thain seems to be simply on a mission to rehabilitate his image. He wants another job. But has he learned anything? If board of directors look at this guy as viable, let them rehire him somewhere else. But anywhere he goes his bad behavior is likely to follow and any bailout money given to a company he leads should be made to be repaid immediately.

Being Slapped on the Wrist

John Thain has resigned from Bank of America after redecorating his office to the tune of $1.22 million dollars after his company received a government bailout totalling $45 billion dollars. What I didn't report here in my earlier post is that Thain's driver was paid big loot too.

According to MSNBC, "Thain also paid his driver $230,000 for one year's work, which included the driver's $85,000 salary and bonus of $18,000, and another $128,000 in over-time pay, documents show. Drivers of top executives are often paid about half that amount."

Thain's resignation will be a simple slap on the wrist if he resurfaces as a CEO or senior executive of another major corporation that received government assistance anytime soon.

Being John Thain

The arrogance, disrespect, and dishonor of people such as John Thain, former CEO of Merrill Lynch now with Bank of America, is mind-boggling. But the reality is those in his industry have operated in an alternative universe for so long that their actions are simply a matter of course for them. This is business as usual and one of the main reasons that we are in such a financial crisis.

Recently, it was discovered that Thain spent some $1.22 million dollar redecorating his office after Bank of America, which acquired Merrill Lynch, had received a bailout from the government to the tune of $45 billion dollars. First Bank of America received $25 billion and then it recently returned to the Treasury Department seeking an additional $20 billion. They got it.

Thain's spending was reminiscent of leaders of another large financial institution upon receiving welfare. Remember that AIG spending $440,000 on spa services after receiving $85 billion of welfare from the government. Here is how a portion of the bailout was spent according to The Daily Beast :

One Area Rug: $87,000
Another Area Rug: $44,000
Curtains: $28,000
Chairs: $87,000
Fabric: $11,000
Table: $25,000
Cadenza: $68,000
Sofa: $15,000
Desk: $18,000
Coffee Table: $16,000
Chandelier: $13,000

While some have called the infusion of government money into private industry a bailout, or a life-line in the above cases, I like to call it welfare. We only associate welfare negatively with certain sectors of the population who cannot care for themselves, even when children are concerned.

Bank of America and AIG receive welfare for mismanagement, greed, and wasteful spending. The ugliness of this all, while perhaps more than a few employees released last year received some sort of government benefit, is disheartening, quite disgusting, to say the least.

Should John Thain be fired immediately?