Merrill Lynch paid out bonuses of more than $1 million each to 696 people last year, according to Attorney General Andrew M. Cuomo of New York.
Those payouts, made just as the firm’s merger closed with Bank of America, have caused a stir because they were made earlier than usual. Merrill typically pays out bonuses in January, but executives wanted to pay the bonuses out before the firm became part of Bank of America at the end of the year. Despite earlier rumors that Bank of America was surprised by the bonuses, the bank has recently publicly stated that they were fully aware of the amounts and timing.
Merrill lost money all year long, largely because of its bad mortgage investments.
Mr. Cuomo is investigating the bonus payments as well as other aspects of the merger. Shareholders and analysts have also expressed concerns about Merrill’s $15.3 billion fourth-quarter loss, which caused Bank of America to request a second round of government bailout money. Bank of America did not disclose early indications of those losses nor did it disclose talks it held with the government about reconsidering the deal in December. The bank’s shareholders voted to approve the deal on Dec. 5.
Mr. Cuomo’s announcement came in a letter sent Tuesday evening to the House Financial Services Committee.
The committee has summoned the chief executives of many of the nation’s largest banks to hearings on Wednesday to explain what they are doing with government bailout money.
On Wednesday morning, Bank of America issued a statement that said: “Merrill Lynch was an independent company last year. Merrill Lynch management proposed and the compensation committee of their board approved incentives. Bank of America did urge the bonuses be reduced, including those at the high end. Although we had a right of consultation, it was their ultimate decision to make. In addition, a substantial amount of the Merrill bonuses were contractually guaranteed.”
What is striking about Mr. Cuomo’s findings is how much money went to how few people. Merrill employs some 39,000 people, and if the $3.6 billion bonus pool had been split evenly the average bonus would have been $91,000, Mr. Cuomo said.