Bank of America’s (BAC) addiction to giving its senior employees huge bonuses has not ended. These used to be based on “performance.” A banker who created toxic asset products that could be sold to clients for tens of billions of dollars was rewarded with a multi-million bonus. He did make the firm money, after all.

The government has taken a dim view of the bank paying executive more than a few hundred thousand dollars no matter how strong their performance has been or how much money they have made for the firm. Bank of America (BAC) has taken and not paid back TARP funds. That gives the government leverage.

The leverage does not seem to be working. According to The New York Post, “Bailed-out Bank of America has been doling out millions in bonuses in an effort to lure talent and keep investment bankers who management views as vital.”

While the government may not like the actions and may not sanction large pay packages as a way to improve the bank’s earnings, B of A management does have a defense and it is a good one. Foreign banks, private equity firms, hedge funds, and competing US banks that have paid back the TARP can easily poach the firm’s best talent if it cannot match compensation packages.

The Treasury and Fed would like to appeal to the taxpayer’s desire to keep his money out of the process of aiding large financial institutions. A school teacher making $30,000 won’t want to have a dime of his taxes going to pay an M&A executive $10 million for bringing B of A $200 million in bank business. But, that is how Wall St. works. A top investment banker can find a home because he is a one-man profit center.

The government may cut off the B of A retention program, but by doing so, it only cripples the firms ability to recover and that, in turn, could cost the taxpayers even more money.

Douglas A. McIntyre

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