Reader with experience on Wall Street writes in:
You really should take a look at disclosure this morning regarding the payment by Merrill Lynch of $3-4 billion in bonuses in late December, just ahead of the closing of the acquisition by Bank of America.
John Thain, former head of Merrill and now formerly with BofA (fired today), paid the bonuses earlier than they are normally paid (late January, February) because he knew that once the BofA deal closed, he would be unable to “reward” all those hardworking Merrill bankers and traders who lost a mere $27 billion in 2008 ($15 billion in just the fourth quarter), and whose company needed an injection of another $10 billion of government capital and $118 billion of government backstops in order to convince BofA to follow through with the 12/31/08 acquisition. Without that capital and backstop, no BofA deal, and certain bankruptcy for Merrill and its fine crew of bankers and traders.
I worked on Wall Street for 15 years, and was laid off late last year. I can tell you this for sure: you don’t need to pay a dime in bonus to anyone on Wall Street these days. I know this firsthand: there’s nowhere to go!
Where would a Merrill banker unhappy with a donut for a bonus go? Lehman? Bear? Bank of America? There are no jobs on Wall Street, there are no jobs on Main Street (and certainly none that will even pay close to what these guys earn just in salary; my salary alone put me in the 99+ percentile in income).
These guys aren’t going to leave Merrill because of no bonus to become CEOs, law firm partners, or MLB shortstops. They’ll do what every single person I know on Wall Street that still has a job: they’ll keep their heads down and hope the next round of layoffs doesn’t include them.
One last thing: this is, I think, would be a perfect situation for Obama to discuss specifically. Merrill bankers and traders making off with $3-4 billion days before taxpayers are “required” to put up another $128 billion in capital and backstops, thanks to the fine work of those bankers and traders? Come on…enough is enough.
David Kurtz is Managing Editor and Washington Bureau Chief of Talking Points Memo where he oversees the news operations of TPM and its sister sites.