Merrill Lynch Execs Paid Themselves $15 Billion on $21.5 Billion in Losses in 2008

No wonder John Thain was sacked. On the surface it appears that he and his management were 'hiding' or at best unaware of enormous losses that were only revealed after they were purchased by the Bank of America, and the recipient of enormous amounts of government funds.

And to make matters worse, they continued to pay themselves huge salaries and bonuses for the year despite those losses.

It will be interesting to see if there is any meaningful investigation of this. We doubt it very much. The Democratic leadership have shown themselves to be a lot of noise and little meaningful action so far, and almost all the Republicans are outrageous hypocrites. Such is the state of the deep capture of the government.

The problem with Wall Street is that there is reward without commensurate risk, pervasive fraud and the misstatement of numbers without the appropriate discovery and deterrence, and a lack of responsible accountability and disclosure to the American people.

Any 'solutions' from the government that fail to address these fundamental problems are not only doomed to failure, but probably represent a looting of public funds by powerful special interests.

If you are holding US dollars and financial assets you are paying for this with an indirect tax on your wealth.


The Wall Street Journal
Merrill paid employee bonuses before sale to Bank of America
LiveMint.com
Thu, Jan 22 2009. 5:30 PM IST

Despite Merrill reporting a massive loss of $21.5 billion in the fourth quarter of 2008, the report noted that the company had “set aside $15 billion for 2008 compensation

London: Collapsed banking entity Merrill Lynch accelerated the payment of bonuses to employees just days before closing its acquisition by the Bank of America, says a media report.

“Merrill Lynch took the unusual step of accelerating bonus payments by a month last year, doling out billions of dollars to employees just three days before the closing of its sale to Bank of America,” the Financial Times has reported.

The daily pointed out that the timing is notable because the money was paid as Merrill’s losses were mounting and Ken Lewis, BofA’s Chief Executive, was seeking additional funds from the government’s troubled asset recovery programme to help close the deal.

Last week, the US Federal government had pumped in another $20 billion into Bank of America mainly to absorb losses incurred from the buyout of Merrill.

This is in addition to $25 billion which it ploughed each into Bank of America and Merrill last year, respectively.

Despite Merrill reporting a massive loss of $21.5 billion in the fourth quarter of 2008, the report noted that the company had “set aside $15 billion for 2008 compensation, a sum that was only 6% lower than the total in 2007, when the investment bank’s losses were smaller”.

“The bulk of 15 billion dollars compensation was paid out as salary and benefits throughout the course of the year,” the report said. Further, attributing to a person familiar with the matter, the report said that an estimated $3 to $4 billion dollars was paid out in bonuses in December.

Merrill and the Bank of America shareholders had approved the takeover on 5 December. “Three days later, Merrill’s compensation committee approved the bonuses, which were paid on 29 December,” it added.

SP Futures Hourly Chart at 3:30 PM Update

The SP failed at overhead support today, and is now winding withing a symmetrical triangle within the downtrend.

The news of Microsoft layoffs dampened the bubbly froth over AAPL overnight.

The market at this point is guilty until proven innocent and so we continue to ride our hedge to the much shorter side after the failure at 844.

We're not riding a pure short because the bulls keep trying to find a footing and we have not seen the failure yet at 805. We'll also look for confirmation on techs.

Gold and silver are consolidating gains as the T Bond shows continued weakness.

Google out with earnings after the bell. Keep an eye out for the GE news and outlook tomorrow morning.

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.”