Reader Russell had wondered whether the attorney general of North Carolina might go after Bank of America over the difficult-to-rationalize bonuses paid to Merrill staff, given that the Charlotte bank had signed off on them (failing to inform and obtain consent Bank of America would have been grounds for terminating the deal).
I had thought it unlikely that the AG of the state in which Bank of America was headquartered would be likely to pursue the big bank. Attorneys general tend not to make waves with their state’s biggest employer (even in the communist state of New York, look what happened to Eliot Spitzer).
However, much to my surprise, the North Carolina AG, Roy Cooper is at least taking names and making waves. It remains to be seen whether this goes beyond the political theater stage. A Civil Investigative Demand, the North Carolina analogue to a subpoena, has apparently been issued, but it isn’t clear what legal theory Cooper is relying upon. Note also that New York attorney general Andrew Cuomo is also pursuing the Merrill bonuses. Another sign of changes in the zeitgeist, or merely a reflection in the dramatic fall in the standing of banks?
From the Charlotte Observer:
N.C. Attorney General Roy Cooper wants Bank of America Corp. to immediately disclose the amount in bonuses it’s paying employees this month for their work in 2008, according to a letter sent to the bank’s board of directors on Thursday.
Cooper also asked the board for an explanation “as to the appropriateness of any bonuses while public money is being provided to the bank,” the letter states. The request follows an earlier demand by his office for records on bonuses paid by merger partner Merrill Lynch & Co. as well as the bank’s acceptance of government assistance.
The new demand follows a Capitol Hill appearance Wednesday by Bank of America chief executive Ken Lewis and seven other CEOs whose banks have received money from the Troubled Asset Relief Program. During his testimony, Lewis faced questions about the bonuses paid by Merrill in December shortly before Bank of America bought the New York investment bank. Lewis noted that his Charlotte bank is paying reduced bonuses this month.
“After the acceptance of public funds, the payment of additional discretionary bonuses under these circumstances is most troubling,” Cooper wrote. The attorney general’s earlier “investigative demand” required the bank to produce records, including information on the bank’s bonuses, by March 4….
Half of the 10 “bands” of Bank of America employees are eligible for year-end incentive pay. Workers have been learning of their lowered payouts in recent weeks. The company employs about 301,000 worldwide…
Since taking federal money, banks have been under pressure from taxpayers and lawmakers to show they’re lending the money to consumers and businesses and not doling it out for expenses perceived as unnecessary.
Bonuses have been a particular flash point. New York Attorney General Andrew Cuomo is also investigating the $3.6 billion in Merrill bonuses, and this week he said that Bank of America acted with “apparent complicity” to Merrill’s bonus plan. Bank of America says those bonus decisions were made by Thain and other Merrill officials.
Lewis told the House Financial Services Committee Wednesday that the bank urged Merrill to slash bonuses, particularly for top executives. But he added that he had no legal right at the time to tell Merrill what to do, since it was still an independent company. Merrill’s fourth-quarter losses ultimately exceeded $15 billion.
Bank of America traditionally pays out its employee bonuses on the 15th of February. In good years, the money can provide a boost to consumer spending in Charlotte.
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“make waves with their state’s biggest employer (even in the communist state of New York, look what happened to Eliot Spitzer)”
I didn’t realize that prostition was New Yorks biggest employer.
This bonus nonsense is simply a diversion. The banks and the GSEs are about to unload $50B of foreclosed properties onto the taxpayers.
Look, I don’t like the idea of bankers getting ‘bonuses’ anymore than the next guy, given the circumstances. But really… this is small beer at this time.
Not everyone who works at a bank is a criminal. In fact most are doing their jobs and doing them well.IF, and that is a big IF some politician could reach out and denude Stan Oneal of his riches I would applaud that just as I would like to see the Madoff’s in chains but it doesn’t affect the larger picture.
Let’s not fall for demogougery. People are losing their jobs and fortunes. I met a man yesterday who had been with Circuit City for 14 years. Ken Lewis didn’t cause that. Millions of US did. Yes, I use the royal WE.
I seldom, if ever, heard a discouraging word in the Bay Area or D.C. suburbs about the ‘nominal’
rise in property prices. Nor have I heard anyone express guilt about shorting the banks on the way down.
This is no longer a morality play. It is tragedy. Where it will end up I know not but if past is prologue none of us will be pleased with the final act.
I wish someone in the media would start call getting paid to do next to nothing on the government’s dime for what it is. Welfare.
We all know Americans hate welfare bums, so labeling them as such would surely help.
Attorneys general tend not to make waves with their state’s biggest employer
For sure! tells you something is brewing maybe public anger is real and folks at the city,county,state levels are closer and act sooner then the Federal. Also might be a good stepping stone for the AG to create a bigger political slot himself by bagging Ken and the gang.
Based on the early comments on the Charlotte Observers website (under the article) the inquiry is going over like a ton of bricks.
Seems like a lot of low to mid-level employees don’t like having their bonuses threatened just days before they are due to receive them.
Let’s get back to bonuses. It is ridiculous to pay them now.
Suppose a guy is making $100,000 for a analyst job that would pay $60,000 elsewhere. (These might be more like GS / MS numbers, I don’t know what the pay scales are in BAC). Then on top of it he gets $80,000 bonus, for a total comp. of $180K. It is pointed out that much of his annual comp. is bonus, it’s an expected part of compensation, and he did a good job after all.
Baloney. Sure he did a good job. His bonus is a combination of individual performance and firm performance. Firm performance is beyond disastrous. And he’s still making more than he would have made working for a normal company. He should be glad he still has a job.
These numbers aren’t made up. They are conservative for top-tier former IBs. Someone who knows BAC or similar pay scales is invited to supply numbers.
I worked on the sell-side for six years and on the buy-side for five years. The sense of ENTITLEMENT on the sell-side borders on insane. Sell-siders, you’d be outta biz if you didn’t have the govvy ride in and save the day. How can ANYONE on the sell-side complain about possibly not getting a bonus? What did your FIRM do to earn it? You’re lucky you still have a job.
And yes, many of my friends are still on the sell-side. And it pisses me off that THE TAXPAYERS are paying their bonuses.
JOKE + BONUS = JONUS
“Cheetos and jonuses for all my boys.”
Anon 9:59 said; “Let’s not fall for demogougery. People are losing their jobs and fortunes. I met a man yesterday who had been with Circuit City for 14 years. Ken Lewis didn’t cause that. Millions of US did. Yes, I use the royal WE.”
Yes, of course we are all complicit, and it is small beer. But some pigs are more equal than others. Ken Lewis is an arrogant elite slime and himself small beer compared to Bernanke, Paulson, Rubin, Summers, Clinton, Bush, et al who intentionally created this financial coup.
The wealthy elite eliminating the middle class IS a morality play. Interest is slavery.
Wake up and smell the aggregate generational corruption.
i on the ball patriot
15 years ago, a buddy who still worked on Wall Street commented that it was full of mediocre, overpaid people. I think a few are genuinely talented, but the excess pay is pervasive.
However, the problem with BofA ex Merrill is that it is a commercial bank, and a cost-conscious one at that. The rank and file is not terribly well paid, and unlike Merrill, did take a big pay reduction on average last year. So Cooper appears to have cast his net a bit too wide in going after BofA. His real objective would seem to be Merrill, and only a small cohort of employees at the stand-alone BofA.
Yves,
I think the question should be — where would BoA be without TARP funds? (That’s not a rhetorical question from my point of view, I really don’t know the answer.)
But whether the BoA employees are terribly paid or not is immaterial. I worked my ass off (and was quite the bargain, I might add) and still got laid off from my non-financial employer for one reason — revenues plummeted, and management decided to cut people to costs. And for that particular industry, costs had to be cut, because the government has shown it cares little for anything else besides finance, with US automakers being the glaring exception.
The ostensible reason for TARP — and thank you for your coverage on it — was to spur lending. If TARP monies are being used for anything else, regardless of how hardworking or underpaid the staff is, that is most certainly the public’s business.
Yves you’re right, to some extent and maybe a very large extent. That extent will be known better after the AG gets his information.
And SBW makes a very important point. It’s OK for bankers to suffer. Others are also suffering, really suffering.
And bankers don’t have to do better than others. It may be time for them to do worse. If any justification for that statement is needed, consider that unless we have more talented people doing more non-banking things, we could never ramp back up on producing non-financial products the world would want to buy. But really no justification is needed.
I didn’t mean to defend BofA bankers per se, but to point out they (unlike the Merrill crowd) have taken meaningful comp cuts and weren’t hugely paid to begin with. Bank of America employees saw their average compensation and benefits fall from $89.420 in 2007 to $75,577, according to the Wall Street Journal, or a more than 15% fall (remember, benefits includes medical and often employer share of FICA, so take-home is even lower). BofA didn’t have much in the way of an investment banking operation and fired many (most?) of its bankers in early 2008.
“I think a few are genuinely talented, but the excess pay is pervasive.”
That’s because they won’t hire anyone without an Ivy league degree. And of course they put a cap on the number they hand out.
Enforced scarcity does wonders for compensation.
Bush and other’s have shown it’s a degree you buy, not earn. The great thing about this financial collapse is that most(not all) of the impostors swaggering around the halls of power will be outed and flogged.
“Communist state” of New York? WTF?
Unless you were being ironic, you really ought to be above that kind of crap.
I still would like to know where the bank examiners and audit people are. Is there a correlation with Colony Collapse Disorder and thus have the bees and examiners all gone someplace? Does anyone know? I looked for them here: Forensic Report on Fraud
They were not there and as I looked at the audit reports, it seems as if they never were there, and it seems that when they were there, they were basically just there to look like they were there, but they never did anything, because there seems to be a deal that they just do what they are told to do, so, why do they go there and where are they now?
This reminds me of the old days:
The Unknown
As we know, There are known knowns. There are things we know we know. We also know There are known unknowns. That is to say We know there are some things We do not know. But there are also unknown unknowns, The ones we don't know We don't know. Department of Defense news briefing Feb. 12, 2002
A Confession
Once in a while, I'm standing here, doing something. And I think, "What in the world am I doing here?"
It's a big surprise.
Interview with The New York Times May 16, 2001
>> Something tells me the poetry from Obama & Team will be along the same lines…
I live in the communist state of New York and think it has much to recommend it, despite the high taxes.
First, we have some rent regulated apartments in New York. Despite the fact that free marketeers howl, it does serve to preserve a small amount of social diversity (and even though rents overall arguable might be cheaper, the regulated apartments are a historical artifact and do not affect new development, which has been considerable).
Second, if you have a health insurance plan with a New York insurer, you have the right to external appeal (as in you write a letter to the state insurance bureau, they send it off to a doctor with relevant expertise to determine whether the insurer is in fact within its rights to deny the claim. I have used this more than once, including times when the insurer tried denying coverage MANDATED by state law. And if I had had no right of external appeal, my only recourse would have been to sue them (and lawsuits in general are uneconomical unless you have, say, $150,000 or more at issue. I have found the external appeals guys have very little patience with health insurer BS, which is refreshing).
New Yorker communard, put er there! I’ll wear a red brassard so long as I get to put a big, black A on it. Upside down, of course: if they shoot yah you can still give them the fig lying on your back looking at the future.
That’s a ‘factua’ if word verification has it right.
@Yves and Richard,
Shusssh, you will disturb years of programming by the ministry of information.
skippy
Looks like the terf war between Raleigh & Charlotte is heating up to a new level. I wonder what other NC papers have to say?
A new generation of reformers is bound to emerge. Nature abhors a vacuum.
The difference in cost of living between Charlotte and New York City is comic. Alan Greenspan put it best in one of his tomes where he dismissed the South as being constantly in Depression. His one single sentence on the South.
Roy Cooper has a cool television ad showing him walking down the US Capitol steps with North Carolina state troopers in rank and file walking behind him. I always thought that television ad was worthy of national viewing.
Roy Cooper cracked down hard on child sexual predators and child molesters. His office created the NCSafe.com web site. You can type in your address and any sex offenders in the neighborhood have their addresses automatically flagged. If the ACLU objected, Cooper certainly didn’t hear about it. In the last 2 months in North Carolina, a man entered a high school typed in his information to obtain a visitor’s pass, and the computer identified him as a predator. He was hauled away.
Maybe Barack picked up the telephone and called Roy Cooper, and Heaven help bankers if Roy starts in on them. In North Carolina, we just sent a 70+ year old former Speaker of the House, Jim Black, to prison on corruption charges.