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Another Insane Wall Street Pay Story

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Almost everyone can agree that Wall Street's top brass made entirely too much money, especially in hindsight. Heck, if you paid me $50 million a year to run a company into bankruptcy, I'm pretty sure I could do it, too.

And whether you're for or against the $700 billion bailout, almost everyone can agree on another point: If Wall Street firms get a dime of government money, there should be strict, stringent, and inarguable caps placed on executive compensation. That's about as fair as it gets.

Thankfully, there are. Part of the bailout bill includes a clause that caps the amount of pay a company can deduct on its top-five executives at $500,000 a year.

Why it only covers five people, we may never know
For one sneaky Merrill Lynch (NYSE: MER  ) employee, not being part of that prestigious "top five" just scored him a nice eight-figure windfall for no more than a few months work.

Peter Kraus, a former Goldman Sachs (NYSE: GS  ) executive recruited to Merrill in September to lead the firm's "growth-and-acquisitions strategy," could walk away with as much as $25 million when Merrill merges with Bank of America (NYSE: BAC  ) , which is expected to happen before years' end. Never mind that Merrill won't acquire anything and certainly hasn't grown: pay for performance has never been big on Wall Street, anyways.

What's a little sketchy is that Kraus was hired, of course, by Merrill CEO John Thain, another Goldman Sachs alum. I'm merely guessing, but I'm sure these guys have been buds for a while and his lucrative pay package was at least given a nod by Thain. It's a tight-knit group, these financial buckaroos.

Sounds all too familiar

Of course, this isn't the only absurd pay story of recent months. Washington Mutual CEO Alan Fishman was granted $19 million for 18 days work, during which time WaMu spiraled into bankruptcy.

Regardless, this is the first, and hopefully last, display of arrogance shown since the Treasury pumped billions of dollars into banks last week. Part of the $25 billion injected into B of A last week was based on the pending Merrill acquisition. We don't know how much was set aside for Merrill, but it really doesn't matter. Taxpayer money was used to prop up a bank where someone -- the director of strategy, of all people -- could walk away with $25 million for four months work.

That should make you sick.

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What now? The Motley Fool is here to answer your questions about this financial crisis. Send us an email at, and check back at as we answer your questions and cover the latest on the Panic of 2008.

Fool contributor Morgan Housel doesn't own shares in any of the companies mentioned in this article. Bank of America is a Motley Fool Income Investor recommendation. The Fool has a disclosure policy.

Read/Post Comments (3) | Recommend This Article (11)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 22, 2008, at 3:35 PM, tholepin wrote:

    I agree that if a bank needs the money to stay solvent they shouldn't pay oversized compensation to executives. But I read that Bac,Wells Fargo, &BBT didn't need or want the money. The government forced them to take it. Which is worse?

  • Report this Comment On October 22, 2008, at 4:24 PM, Tiingall wrote:

    Allowing these enormous payments is just crazy when you think how many peoples' job and homes could be saved if the same money was spent more responsibly.

    Why are you allowing it? Are you complaining to your politicians? Are you passing the damning documentation to the media and the FBI for investigation? These are criminals who are demonstrating that while everyone else is suffering - and about to suffer more - their personal greed is insatiable. This is the same personal greed that motivated them to create the loan scams that led you all into this abyss.

  • Report this Comment On October 23, 2008, at 12:33 PM, LikeSoup wrote:

    It seems to get crazier by the day. Hold on tight. It's going to be quite a ride. People everywhere are afraid about a number of different things, seemingly with good reason. Consider alternatives and the possibility that your life truly can be in your own hands .

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