Bank of America Paying Hefty Bonuses

June 18, 2009 – 11:07 am – Comments Off

Bank of America first hit the news as one of the major banks receiving TARP funds. The government “stress tests” found that Bank of America needed $33.9 billion in capital just to survive. When that news came out, they started selling extra stocks and liquidating assets in order to raise such a large amount of capital and they succeeded, Now that Bank of America has made some brilliant financial decisions and created billions of dollars in capital, they are spending millions in bonuses, hoping to “lure and retain talent”.

This is understandably reminiscent of AIG paying out TARP funds as bonuses and taking an executive island vacation on the taxpayer’s dime. When AIG paid out those millions of dollars in bonuses, they were referred to as “retention payments”, making sure the talent they already had did not choose to go to a stronger company. Now Bank of America is doing the same thing.

It is likely Bank of America will not see the harsh national uproar AIG saw because it’s not exactly on the taxpayer’s dime. Bank of America is paying out capital they raised which they can do what they want with. However, with Bank of America doing through the Merrill Lynch merger situation and still being rather weak, it makes experts and the public wonder if they should be spending all these dollars in retention bonuses.

Among the employees who supposedly received the retention bonuses are two former Merrill Lynch bankers, Fares Noujaim, a former Bear Sterns banker that joined Merrill Lynch last year, recently appointed vice chairman of investment banking at Bank of America, and Harry McMahon. Noujaim is supposed to receive $15 million paid over the course of two years. Both men were offered these bonuses in exchange for the promise not to leave the company. Apparently the Merrill Lynch merger is going through after all.

“Competitive recruiting in investment banking and capital markets continues to be very intense and we’re taking the steps necessary to retain key talent in response to competitive pressures.” spokeswoman Jessica Oppenheim told the New York Post. She also went on to say that any specific reports as to the amount of money Noujaim is being paid is not correct, calling them “inaccurate”. Many news organizations have attempted to contact Bank of America directly considering this new development but to no avail.