Government officials turned up the heat on
Bank of America
on Monday, demanding that the firm provide details of big payouts the company and
executives received before the two companies combined on Jan. 1.
New York Attorney General Andrew Cuomo and House Financial Services Committee Chairman Barney Frank (D., Mass.) wrote a joint letter to BofA CEO Kenneth Lewis, asking that he provide details of any employee who received more than $1 million in 2008 bonus payments. Cuomo alleges that Merrill executives moved up the date of bonus payouts before the merger to avoid scrutiny, "knowing full well" that the firm would rack up huge losses last year.
BofA was forced to seek additional government funding to close the deal, as Merrill's losses accelerated. All told,
lost $27.61 billion in 2008, a figure that was adjusted upward in its 10-K filing due to flawed accounting. Bank of America has received $45 billion in government loans and $118 billion in guarantees against Merrill's toxic assets to support its acquisition.
Despite those big-ticket losses and government largesse, Merrill paid out $36 billion in bonuses last year, while BofA distributed over $3.3billion.
"Taxpayers who are footing the bill obviously demand accountability and want to know who received these funds and why," Cuomo and Frank wrote in their letter.
Cuomo's office has been requesting information about Merrill's bonuses since October. He has been collaborating with Frank on the investigation at least since February, when he sent the Congressman a
outlining what he characterized as an underhanded ploy to pay executives without disclosing appropriate information to regulators.
The two also implied that BofA has not fully cooperated with the investigation now that Merrill is under its wing, saying that the bank's "refusal to reveal compensation information fuels distrust and cynicism at a most sensitive time."
Bank of America has indicated that it is fully cooperating with investigators, and that it had no direct oversight of Merrill's bonuses, since they were approved and paid out under the leadership of Merrill CEO John Thain, before his firm was acquired by BofA at the start of 2009.
On Monday, BofA said that Cuomo and Frank's letter to Ken Lewis went above and beyond any earlier requests for information. The Charlotte, N.C.-based bank implied that its own bonus data had not earlier been requested, and that any information on Merrill bonuses was provided with an understanding that it would not be made public.
"The March 9 letter is far broader, and goes beyond Merrill Lynch to include all TARP recipients, including Bank of America," the bank said in a statement. "Bank of America has continued to offer to share Merrill Lynch bonus information with the New York Attorney General's office subject to a reasonable confidentially agreement."
The Obama administration, Congressional Democrat leaders and Cuomo have all been railing against big executive compensation packages and perks, which have set off a storm of public fury. President Barack Obama slashed in half a $1 million bonus cap put in place under the Bush administration for any bank receiving TARP funds, while lawmakers seized upon an opportunity to chastise CEOs about
Banks have responded with various measures. For instance,
outlined their moves to cut bonuses, freeze salaries and or forfeit compensation before Congress last month. They also argue that staff and executives in divisions that are profitable do not deserve to be punished for the missteps of their counterparts in subprime mortgage trading and credit derivatives.
But as taxpayers seethe over the hundreds of billions of public dollars used to support the financial system, and legislators use that fury for political grandstanding, the fight is likely to continue.