John Thain: Sacked! or Sach'd?

As reported earlier by Yves Smith at Naked Capitalism, it has recently been revealed that Merrill Lynch and John Thain accelerated the payment of substantial executive bonuses just prior to the company's crash, and their acquisition by BofA.

Merril Lynch: Infamia!

Perhaps the disclosure of substantial undisclosed losses was the last straw (18 billion versus 2 billion expected). You can take big bonuses, but not with big losses, unless you are at the-former-investment-bank-which-must-not-be-named, whose SIV is the Federal Reserve.

Bloomberg
Ex-Merrill Lynch CEO Thain Agrees to Leave Bank of America
By Josh Fineman and David Mildenberg

Jan. 22 (Bloomberg) -- Former Merrill Lynch & Co. Chief Executive Officer John Thain agreed to leave Bank of America Corp., a spokesman said.

Thain, who in September negotiated the sale of Merrill with Bank of America CEO Kenneth Lewis, “agreed his situation was not working out and that he should resign,” said Robert Stickler, a Bank of America spokesman, in an e-mail.

Trading chief Tom Montag will also leave the firm, CNBC reported.

Thain, 53, lost his job after Merrill’s unexpectedly large $15.4 billion fourth-quarter loss forced Bank of America to return to the U.S. government for a new funding package. Thain this year spent $1.2 million to redecorate his office at New York-based Merrill, CNBC reported today.

Thain had headed Bank of America’s wealth management and corporate and investment banking divisions. Senior Merrill executives Robert McCann and Greg Fleming resigned less than a week after the transaction was completed on Jan. 1.

A Sad Day for the Swiss Franc

"What the Swiss government and central bank have done to their economy and finances is a disgrace. We hold no Swiss francs any longer. The Swiss people have been treated badly." 6 November 2008 Le Café Américain

We warned some time ago that the Swiss franc, long a beacon of monetary stability through the world, has been horribly compromised by a central bank with policies little different from those of the Fed, and other central banks using competitive devaluation to promote industrial policy.

If you are a Swiss exporter or a Bank you might be content.

If you are Swiss and you wish to preserve your wealth, buy gold.

"…the national bank will continue to act decisively to fight the impact of the economic contraction… a central bank can always increase the absolute amount of its own currency in circulation... the national bank could sell Swiss francs against other currencies without limits. In an extreme case, it could commit itself to buying foreign currencies at a fixed rate."
Philipp Hildebrand, Vice Chairman, Swiss National Bank

Hildebrand Says SNB Can Intervene in Franc Market
By Joshua Gallu and Simone Meier

Jan. 22 (Bloomberg) -- Swiss National Bank Vice-President Philipp Hildebrand said policy makers are prepared to intervene in currency markets at fixed exchange rates if necessary to prevent a “renewed appreciation” of the franc...

The franc has risen around 6 percent against the euro since October as the global financial crisis forced the Swiss central bank to cut its benchmark rate by 225 basis points, taking it to 0.5 percent. That’s smothering inflation and hurting exports, which make up more than half of Swiss gross domestic product. (And the other half is dominated by banks which are largely insolvent through mismanagement and various forms of fraud - Jesse)

“With short-term rates of practically zero, the SNB can’t prevent a further appreciation in the Swiss franc through a rate cut,” Hildebrand said in a speech in St. Gallen, Switzerland late yesterday. “The SNB is able to sell unlimited Swiss francs versus another currency. In an extreme case, it can commit itself at the same time to buying unlimited currencies at a fixed- exchange rate.”

The franc dropped after the remarks and extended its decline today. As of 7:51 a.m. in Zurich, it was at 1.5093 per euro from 1.5022 yesterday. It reached a record high of 1.4315 versus the euro on Oct. 27. Against the dollar, the franc was at 1.1562, having fallen late yesterday to 1.1616, the weakest since Dec. 15.

“The central bank can and will continue to provide liquidity, as much and for as long as needed,” Hildebrand said. “The SNB will continue to act in a decisive way in order to counter the effects of the economic contraction.”

Merrill Lynch: Infamia!

Apologies for the lapse into Italian, but it is a remnant of my childhood. My father had a remarkable talent for expressing strong emotion in this language as in no other way.

Until serious reforms are made in the banking system, and the accounts are squared with those who brought us to this misfortune, there can be no recovery, and no sustained return to individual liberty.

So, what would we like to do about this latest outrage?


Merrill Execs Pay Selves Bonuses Ahead of Schedule (and
Before BofA Closing)
Naked Capitalism

Playing fast and loose seems to be the theme of the evening... now we have the eleventh hour stealing of the silver by Merrill's top executives as one of the firm's final acts.

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.

Efforts are being made to minimize the amount involved (it is claimed to be only $3-$4 billion, but the fact is amounts were reserved in prior quarters that are excessive in light of full year performance. So the fact that some of the amounts were allowed for in previous quarters is misleading).

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...