If reports are correct, Bank of America (NYSE:BAC) could pay 2007-style bonuses to some employees of its Merrill unit. Some people might consider that "retention" in a "free market." I call it parasitic. A truly free market would have doled out just deserts to many financial companies: failure, no bonuses, and indeed, no jobs at all.
According to The Wall Street Journal, Merrill's "stratospheric pay culture" never got an adjustment, despite its fall from grace. The Journal reports that these new potential bonuses are intended to stem talent defections and reward Merrill's "recovery." The investing arm generated $2.2 billion in profits over the first three quarters of last year. However, much of that so-called "good performance" has probably owed more to luck -- or the past year's favorable market conditions -- than skill or brilliance. Besides, the last thing corporate America needs is more encouragement to view "performance" entirely in the short term.
Bank of America, Wells Fargo (NYSE:WFC), and other megabanks have been repaying their TARP obligations, but they may be driven as much by a desire to escape from government scrutiny as any dutiful sense of obligation. And I've seen no indication that they won't come running right back to Uncle Sam the next time they need handouts.
Entitled attitudes are nothing new on Wall Street, alas. AIG (NYSE:AIG) has been the poster child for huge bonuses for jobs not well done, yet some of its employees still have the audacity to whine about their compensation. Never mind that the company would have failed without government intervention. (In fairness to the feds' decision to bail it out, AIG would have also grievously wounded many other companies, such as Goldman Sachs (NYSE:GS), in its death throes -- although I'm not sure many of us would have shed tears over that.)
According to the WSJ, a Bank of America spokesperson warned against assumptions regarding the bonus amounts; the figures could change, and they must be approved by the company's board. Let's hope the board stands up to any nonsense in the payout numbers. After all, shareholders' ire over a previous round of fat executive bonuses at Merrill helped push former CEO Kenneth Lewis into retirement.
Our recent economic pain should have helped us all learn valuable lessons on honesty, responsibility, and restraint. Instead, there are plenty of signs that our massive bailout has simply enabled Wall Street to continue on its delusional, entitled way. I can only hope the rumors about bonus bonanzas at Merrill Lynch aren't true. By now, I'm guessing taxpayers and shareholders have begun to tire of their constant muggings at the hands of big banks.
