Wow. Our experiment is off to a great start—let's see if we can finish it off sooner than expected.
Andrew Cuomo, New York's Attorney General, is most displeased. Cuomo is investigating why Merrill Lynch handed out $3.6 billion in bonuses before releasing its horrendous results for the fourth quarter of 2008, in which it lost $15.31 billion. After doling out the bonuses, Merrill Lynch was subsequently bought by Bank of America (with $20 billion of taxpayer help), and Bank of America was later the beneficiary of a $25 billion government bailout. The bonuses were also very unequally distributed—while 39,000 employees received some bonus money, 700 employees were made millionaires by the bonus pool, and the top 149 bonus recipients alone received $858 million. The New York AG's office wants to know why Merrill Lynch saw fit to reward so few of its employees so extravagantly for such massive failure. But Cuomo's not stopping at a state-level investigation—he's also calling in the feds. In a letter to Rep. Barney Frank (D-Mass.), the chair of the House Financial Services Committee, Cuomo dishes the dirt on his ongoing investigation of Merrill:
On October 29, 2008, we asked Merrill Lynch to detail, among other things, their plans for executive bonuses for 2008, including the size of the bonus pool and the criteria they planned to use in determining what, if any, bonuses were appropriate for their top executives... Merrill did not provide my Office with any details as to the bonus pool, claiming that such details had not been determined.
Rather, in a surprising fit of corporate irresponsibility, it appears that, instead of disclosing their bonus plans in a transparent way as requested by my Office, Merrill Lynch secretly moved up the planned date to allocate bonuses and then richly rewarded their failed executives. Merrill Lynch had never before awarded bonuses at such an early date and this timetable allowed Merrill to dole out huge bonuses ahead of their awful fourth quarter earnings announcement and before the planned takeover of Merrill by Bank of America. [emphasis added]
The sheer Rod-Blagojevich-esque audacity of Merrill's move is impressive. Merrill knew it was being watched by Cuomo, who had asked them to behave reasonably and transparently with their bonuses. One would think that knowledge would inspire some sort of caution. But no—instead, Merrill just went ahead and did what it wanted to anyway, likely figuring that politicians wouldn't have the stomach to take back bonuses that had already been handed out. (Better to beg forgiveness than to ask permission.) That may be the case, but one of Cuomo's accusations seems to make government punishment a bit more likely. "One disturbing question that must be answered," Cuomo writes, "is whether Merrill Lynch and Bank of America timed the bonuses in such a way as to force taxpayers to pay for them through the deal funding." Sure, politicians are reluctant make people give up already-awarded bonuses. But if the bonuses essentially came from taxpayer money, public outrage might force Congress (or Cuomo) to make Merrill's employees give the money back.