Bank of America (NYSE:BAC) CEO Ken Lewis is gone now, but the culture of big pay packages established on his watch is not.
The bank will pay large bonuses for 2009 to many of its top traders and investment bankers. Many of them are people who came to B of A with the buyout of Merrill Lynch. According to The Wall Street Journal, “Through the first three quarters of last year, Merrill churned out profit of $2.2 billion, or about one-third of Bank of America’s overall earnings of $6.5 billion.”
The bank would not comment on its bonus payouts for 2009. It is clear that to total compensation pool may not increase a great deal from 2008, but some bankers, the best performers supposedly, will get eye-popping year-end checks and stock grants.
Congress and the press will have a field day with the B of A bonus news. The bank may end up defending the compensation by saying the best traders produced large profits and, if they are not compensated fairly, they will leave for hedge funds, foreign banks or Goldman Sachs (NYSE:GS) where management does not care about public opinion.
Bank of America paid back its TARP money. It may have needed the capital as the credit crisis reached it peak in late 2008. Taxpayers put their money at risk, but they got it back and made a profit, primarily due to warrants that the Treasury got due to its aid. Now that B of A has squared itself with taxpayers, it should pay people what the financial firm’s board thinks they are worth. That is part of why the bank has a board, after all.
Douglas A. McIntyre
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