Change To Win Calls On Congress To Rein In $3.6 Billion Merrill Lynch Bonus Payments

FOR IMMEDIATE RELEASE
Friday, March 20, 2009

CONTACT: Greg Denier, 202-486-2365
Noreen Nielsen, 202-721-6047

WASHINGTON, D.C. -- Change to Win called on Congress today to amend the critical tax legislation to recover the unwarranted and outrageous bonuses to failing managers of AIG and other bailout recipients to include the $3.6 billion in bonuses Bank of America allowed Merrill Lynch to secretly pay in advance of its merger.

"The Merrill Lynch bonus pool is one of the most egregious bonus fiascos on Wall Street," said Change to Win chair Anna Burger. "American taxpayers are tired of repeatedly seeing corporate excess rewarded, but adding insult to injury, they are now being asked to reward corporate failure. Enough is enough."

"It's time for Congress to put an end to these atrocities and instead work to help restore the economy, rebuild the middle class, and renew the American Dream for America's workers instead of supporting the lavish lifestyles of greedy corporate managers."

The tax legislation that passed the House on Thursday imposes a 90 percent surtax on bonuses granted to employees who earn more than $250,000 at companies that have received at least $5 billion from the government financial rescue program, also known as TARP. The bonus tax, if passed as is, would be retroactive to December 31, 2008, leaving the Merrill bonuses out of the scope of the law.

As the result of a secret Agreement uncovered by N.Y. Attorney General Andrew Cuomo, Bank of America, which had already agreed to acquire Merrill Lynch, was complicit in Merrill's plan to secretly pay $3.6 billion in bonuses before year end. Merrill normally pays bonuses in January. Moreover, Bank of America had already received $25 billion in TARP funds at the time of its complicity in the Merrill bonus payments, and subsequently received another $20 billion in TARP funds expressly as a result of Merrill's rapidly deteriorating financial condition.

"It is absolutely obscene for those most responsible for our nation's financial crisis to walk away with millions of dollars in bonuses while America's hard working families struggle to pay their mortgages, health insurance, and children's education," continued Burger.

Full text of the letter follows. A copy of the letter in Adobe PDF format is also available for download.


March 20, 2009


The Honorable Max Baucus
Chairman, Senate Committee on Finance
The Honorable Charles Grassley
Ranking Member, Senate Committee on Finance

The Honorable Charles Rangel
Chairman, House Committee on Ways and Means
The Honorable Dave Camp
Ranking Member, House Committee on Ways and Means

Dear Chairman Baucus and Senator Grassley; Chairman Rangel and Representative Camp,

As you finalize critical tax legislation to recover the unwarranted and outrageous bonuses to failing managers of AIG and other bailout recipients, I ask urgent attention to the $3.6 billion in bonuses that Bank of America allowed Merrill Lynch to secretly and prematurely pay in December 2008. Without an amendment, Bank of America/Merrill managers will retain the most egregious bonus fiasco on Wall Street, one 20 times greater than at AIG.

As you know, the just-approved House bill imposes a 90 percent surtax on bonuses granted to employees who earn more than $250,000 at companies that have received at least $5 billion from the government's financial rescue program. The bonus tax, if approved by the Senate and signed into law, would be retroactive to December 31, 2008. Essentially, this covers bonuses for the 2008 calendar year but paid in 2009.

In apparent violation of Congressional intent, Merrill's extraordinary 2008 bonus debacle would not be covered as a consequence of two arcane technicalities not envisioned in the current bill.

First, Merrill secretly accelerated $3.6 billion in 2008 bonus payments to early December 2008, prior to the closing of its acquisition by Bank of America and the disclosure of its $13 billion fourth quarter loss. This premature payment was unprecedented at Merrill, which typically pays bonuses in January. In fact, Merrill informed Congress in a November 24, 2008 letter that, "incentive compensation decisions for 2008 have not yet been made" and that directors would do so at "year-end." This claim proved misleading.

Second, although Merrill had been approved for $10 billion in TARP funds at the time of the bonus payouts, receipt of the money was deferred pending the outcome of the Bank of America acquisition. There is no question that taxpayers subsidized the Merrill bonuses as a result of TARP funds granted to Bank of America.

Bank of America had already received $25 billion in TARP funds at the time of the Merrill bonus payments. And the bank subsequently received another $20 billion in TARP funds expressly as a result of Merrill's rapidly deteriorating financial condition, a decline exacerbated by the premature payout of nearly $4 billion in undeserved bonuses.

Moreover, Bank of America, which had already agreed to acquire Merrill, was complicit in the Merrill bonus payments as a result of a secret agreement uncovered by New York Attorney General Andrew Cuomo. According to this secret Agreement, 2008 bonus awards at Merrill were to be arrived at "in consultation with [Bank of America]." As New York Attorney General Cuomo informed a New York Court, "Despite its representations to the contrary, Bank of America clearly could have influenced, if not controlled, the timing of Merrill's bonuses."

I appreciate your prompt consideration of this matter.

Sincerely,

Anna Burger


Cc: Rep. Barney Frank, Chairman, House Committee on Financial Services
Rep. Spencer Bachus, Ranking Member, House Committee on Financial Services
Sen. Christopher Dodd, Chairman, Senate Committee on Banking, Housing, and Urban Affairs
Sen. Richard Shelby, Ranking Member, Senate Committee Banking, Housing, and Urban Affairs