The Economic Crisis
After getting $125 billion in taxpayer bailouts, the top officers at Citigroup, Merrill Lynch, Goldman Sachs, and three other banks agreed to forgo their 2008 bonuses. Now they’re awarding billions to their troops. Can government “claw back” that money?by Michael Shnayerson March 2009
On December 8, The Wall Street Journal reported that John Thain, the 53-year-old chairman and C.E.O. of Merrill Lynch, had let it be known he wanted a $10 million bonus.
And why not? After all, Thain had made the brutally pragmatic decision, over the mid-September weekend that changed Wall Street forever, to sell the 94-year-old firm to Bank of America for $50 billion, averting the bankruptcy that awaited Lehman Brothers that Monday and saving Merrill’s shareholders billions of dollars. Surely, even in a bad year, he was entitled to the equivalent of a 25-cent tip on the deal.
But the directors balked. Wouldn’t that send the wrong signal after Merrill’s net losses for three quarters of $11.67 billion? Especially after Bank of America had taken $15 billion of federal bailout money and was due to take the $10 billion earmarked for Merrill as well? When as many as 30,000 jobs may be lost from the acquisition?
The same day came a scathing letter to the board from New York attorney general Andrew Cuomo. Soon after, a grim Thain walked into Merrill’s boardroom and apparently told the directors he’d had a change of mind: no bonus for him, thank you.
Thain had gotten the message at last: bonus season would be different this year. At least, it would have to look different.
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For many U.S. taxpayers, the bailout was infuriating enough on its own terms: $700 billion of public money in all ($5,073 for every taxpayer) given to Wall Street for bingeing on risky bets and pocketing the profits, living high and leaving the government to mop up the losses. But … bonuses! That was an incitement to riot.
And so, Thain’s misstep notwithstanding, the top officers at six large tarp-infused firms declared they were forgoing bonuses this year. The headlines were dramatic, and they seemed to work. Editorial writers held their fire, public outrage cooled. But did all this falling on swords really mean no bonus season on Wall Street this year?
It did not.
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