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| | The Small Business Think Tank Network is not currently active and cannot accept new posts | | Merrill CEO bonus is 'shocking' | Views: 565 | | Dec 08, 2008 10:04 pm | | Merrill CEO bonus is 'shocking' | # | 
Kathy Buck | | read if your daring
By Ben Rooney, CNNMoney.com staff writer
Last Updated: December 8, 2008: 4:49 PM ET
NEW YORK (CNNMoney.com) -- New York Attorney General Andrew Cuomo said Monday that the $10 million bonus reportedly being considered for Merrill Lynch's chief executive John Thain is "nothing less than shocking."
In a strongly worded letter sent to members of Merrill's board of directors, Cuomo points out that the brokerage reported losses for every quarter this year, and has lost more than $11 billion in 2008.
He added that Bank of America's (BAC, Fortune 500) takeover of Merrill, which was formally approved by shareholders Friday, "seems to have been the only thing that saved Merrill from collapse."
"Clearly, the performance of Merrill's top executives throughout Merrill's abysmal year in no way justifies significant bonuses for its top executives, including the CEO," Cuomo said in the letter.
A spokeswoman for Merrill Lynch (MER, Fortune 500) declined to comment.
Merrill Lynch's Thain, 53, who joined the ailing brokerage last December, is reportedly requesting a year-end bonus of $10 million, a source familiar with Cuomo's investigation told CNN.
Cuomo has been a vocal critic of the "outsized" bonuses Wall Street's top executives have received, which he says are even more unjustified in light of the current economic crisis and the billions of taxpayer dollars that have been injected into the banking system.
"It is imperative that Merrill's Board prevent wasteful expenditures of corporate funds on outsized executive bonuses and other unjustified compensation," Cuomo said.
Meanwhile, John Mack, the chief executive of recently-minted commerical bank Morgan Stanley (MS, Fortune 500) will forgo his bonus this year, according to a company spokeswoman. Going forward, Morgan also plans to tie executive compensation more closely to the firm's performance.
"This gesture by Morgan Stanley is appropriate, and I hope other firms like Merrill Lynch will take it to heart," Cuomo said in a seperate statement.
Merrill's Thain replaced Stanley O'Neal as chief executive after the firm reported its first multi-billion dollar loss on bad mortgage-backed assets late last year.
As losses accelerated, Thain orchestrated the deal with Bank of America in September to save 94-year-old brokerage.
The deal valued Merrill at $50 billion at the time. Bank of America shares have fallen 46% since then, putting the value on the merger at just under $20 billion as of Friday.
In October, Merrill Lynch received a $10 billion capital investment from the government's Troubled Asset Relief Fund. Bank of America got $15 billion from TARP.
To date, the government has given a total of $161 billion to more than 50 banks.
"I sincerely hope that Merrill Lynch rejects this request," said Senate Majority Leader Harry Reid, D-Nev., in a statement.
"While American families struggle to keep their jobs and their homes, I question the chutzpah of asking for a $10 million taxpayer-subsidized bonus." To top of page
http://money.cnn.com/2008/12/08/news/economy/Cuomo_Thain/index.htm?postversion=2008120815
talk about some big nards...excuse me while I go vomit
Private Reply to Kathy Buck | | Dec 08, 2008 10:13 pm | | re: Merrill CEO bonus is 'shocking' | # | 
Pete Hollier | | Oh Dear I shouldn't of read that.
Must be nice to be paid so well to be incompetent! Private Reply to Pete Hollier | | Dec 08, 2008 10:19 pm | | re: Merrill CEO bonus is 'shocking' | # | 
Scott Wolpow | | I thought bonuses were for jobs well done. Private Reply to Scott Wolpow | | Dec 08, 2008 10:34 pm | | re: re: Merrill CEO bonus is 'shocking' | # |
Kathy Buck | | I was reading the market Watch something wall street 24/7 article praising Thain for brokering the BA deal and saving shareholders money. The Assault was on the former CEO for creating the mess.
Uhm...someone accepted the CEO position. If you jumped on a sinking ship just to grab the gold & 1st class passengers, one deserves to go down with the ship and the lower class working folk. *insert Titanic Theme* LOL
*kicks desk*
PATHETIC Private Reply to Kathy Buck | | Dec 08, 2008 11:13 pm | | re: Merrill CEO bonus is 'shocking' | # | 
Lindy Asimus | | The bonuses from the previous 5 years should all be paid back by these executives.
The politicians whose job it was to be watching over the industry should be brought to account.
This isn't shocking so much as it is a continuing obscenity and the host of individuals involved should be banned from holding positions like this into the future.
These people - aside from the misery they have caused financially, have been rewarded at every turn for creating this situation. I wonder why there has been no charges of treason.
That would be treason against Humanity perhaps. Since it the misery that has been wrought is not just confined to the citizens of the US.
Lindy
Private Reply to Lindy Asimus | | Dec 09, 2008 5:18 am | | re: re: Merrill CEO bonus is 'shocking' | # | 
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CRELoaded websites http://RegCharie.com Private Reply to Reg Charie | | Dec 09, 2008 5:47 am | | re: re: Merrill CEO bonus is 'shocking' | # | 
Lamar Morgan 954-603-7901 | | Lindy,
High risk loans is what created the Wall Street crisis. Wall Street does not create those loans. The banks create the loans. However, the Wall Street firms did purchase the loans and then collateralized them into mortgage-backed securities called "CMO's." Those securities are then traded by the traunch over and over again. This is the equivalent of placing bad apples in a barrel with good apples. Eventually all the apples are bad.
This problem has its genesis at the bank - not the brokerage house. While I believe every person should have a roof over his head, you should not give a person a loan who has no means to repay it. But, thanks to Congressmen like Barney Frank, banks were pressured to give money to people who had no means of repaying it. To my way of thinking, that made the CMO that was eventually created using it more than simply high risk. That made the CMO a fraudulent investment.
If Congress decides to send certain Wall Streeters to jail, I think some bankers should go with them.
Lamar Morgan
CDMM - Synergistic Business Marketing
707-709-8605
Attract more customers! Private Reply to Lamar Morgan 954-603-7901 | | Dec 09, 2008 6:15 am | | re: re: re: Merrill CEO bonus is 'shocking' | # |
Lindy Asimus | | Why Lamar, you think I don't expect a special place in hell reserved for the bankers?
Not just the bankers.
The politicians whose job it was to oversee that sector ... and accepted the armfuls of money along the way, should be assured their place too.
Lindy
Private Reply to Lindy Asimus | | Dec 09, 2008 12:28 pm | | re: re: re: re: Merrill CEO bonus is 'shocking' | # |
Scott Wolpow | | I say that the US government should sue on behalf of the taxpayer all these people who got rich off 'stealing' the money.
Private Reply to Scott Wolpow | | Dec 09, 2008 12:37 pm | | re: re: re: Merrill CEO bonus is 'shocking' | # |
Kathy Buck | | "But, thanks to Congressmen like Barney Frank, banks were pressured to give money to people who had no means of repaying it."
Keep listening to Rush Limbaugh and watching Faux News Lamar.
Barney Frank encouraged lending to the creditworthy. Why? because so many institutions were gun shy due to buyouts of junk.
Barney Frank took over as chairman of Financial Services Committee in o7, who controlled the committee prior? You think this abyss was created in 9 months? Frank and Company have also tried to create bills to regulate and monitor lending institutions. Senate has refused to pass.
Nonetheless, this is not the forum to bring emotional political comments like presented. I am as you have called it a "demon-crat" and not a huge fan of Frank but to throw one man under a bus for the doings of many is just bull doo doo.
The crisis is having a ripple effect on a global stage, I agree with Lindy in that people acting in what should be deemed as fraudulent activities w/ lending should be held accountable.
The world is watching...Private Reply to Kathy Buck | | Dec 09, 2008 1:06 pm | | re: re: re: re: Merrill CEO bonus is 'shocking' | # |
Scott Wolpow | | Frank did cause the initail problem under Clinton. But the reasons were good. The goals was for the poor to become landowners and to build equity.
In lower income areas, the rent is higher per square foot than middle class areas.
In the 70's Brooklyn and teh Bronx were REDLINED, meaning no person could get a mortage.
Carter was the first to pass rules easing the requiremenst of lending to those areas.
However, by the sames laws to protect the minorities and poor, were used to expand those loans under Clinton.
No one complained when people got jobs in the construction boom. No one comaplaimed when they got jobs that spun off.
No one compalined when capital was so cheap that it could be thrown ar silly concepts like Napster, that gave money to people to develop Ryze.
We all benefitted from it and supported it, now we have to pay the price. I just want those running the comapnies to suffer like we did and only reward them if they do a good job.Private Reply to Scott Wolpow | | Dec 09, 2008 4:07 pm | | re: Merrill CEO bonus is 'shocking' | # | 
Kurt Schweitzer | | (Note: I'm not trying to defend this guy's bonus. I'm simply trying to illustrate the thinking that MIGHT be behind it.)
From the article:
"As losses accelerated, Thain orchestrated the deal with Bank of America in September to save 94-year-old brokerage.
"The deal valued Merrill at $50 billion at the time. Bank of America shares have fallen 46% since then, putting the value on the merger at just under $20 billion as of Friday."
Thain is credited with "saving" the brokerage, which is currently worth $20 billion. He's asking $10 million for doing this.
Suppose someone "saved" your $20,000 business. Would you be upset about paying him a $10 bonus?
Proportionally that's all Thain is asking - $10 for every $20,000 that the business is worth. Only 0.05%
For some reason people confuse "million" and "billion". I think they are both equated to "really big", so when someone "saves" a $20 "really big" business and then asks for a $10 "really big" bonus, it looks like he's asking for half of everything that business is worth. Which simply isn't the case.
Now, should he be receiving a "really big" bonus at all, no matter what he's done? I personally don't think so, but that's partly because I've yet to have any "really big" dollars of my own. Maybe when I get that rich I'll see things differently.
Kurt Schweitzer
Urban Village ScootersPrivate Reply to Kurt Schweitzer | | Dec 09, 2008 5:35 pm | | re: re: Merrill CEO bonus is 'shocking' | # |
Scott Wolpow | | Kurt,
He needs to get paid at a later date, when he has proven his worth. We are his bosses now.
The comapny is only worth what it is because of the bailout, otherwise it would be worth as much as yesterdays newspaper.Private Reply to Scott Wolpow | | Dec 12, 2008 5:55 am | | re: re: re: re: re: Merrill CEO bonus is 'shocking' | # |
Lamar Morgan 954-603-7901 | | Scott,
You said, "In lower income areas, the rent is higher per square foot than middle class areas." I have no idea if that is true, but it certainly seems wrong. Please explain why a slum would be worth more per square foot than a square foot in a middle class area.
Lamar Morgan
CDMM - Synergistic Business Marketing
707-709-8605
Attract more customers! Private Reply to Lamar Morgan 954-603-7901 | | Dec 12, 2008 10:25 am | | re: re: re: re: re: re: Merrill CEO bonus is 'shocking' | # |
Kathy Buck | | ""In lower income areas, the rent is higher per square foot than middle class areas."
In my neck of the woods (by no means lower income) the empty retail spots building owners are charging 20/sq ft VS the filled buildings at 9/sq ft (these are averages). Why? to keep the riff raff out. Serious "creditworthy" folks only RE: city economic revolving loans. Our city is on state historical records as the most pre-civil was buildings, they need much work inside. The city is going fifteen rounds with one out of state investment group w. one building.
just one theory. Private Reply to Kathy Buck | | Dec 12, 2008 3:04 pm | | re: re: re: re: re: re: Merrill CEO bonus is 'shocking' | # |
Kurt Schweitzer | | You said, "In lower income areas, the rent is higher per square foot than middle class areas." I have no idea if that is true, but it certainly seems wrong. Please explain why a slum would be worth more per square foot than a square foot in a middle class area.
------
Lamar,
First, Scott didn't say a slum was WORTH more per square foot, he said that RENT was higher per square foot. Consider a few possible reasons why this might be so:
1. Risk - People who rent in slums are riskier bets. Their income tends to be not as steady, they don't earn as much so their rent is a larger percentage of their income, and they live closer to "the edge" financially. All of those reasons mean that they are more likely to be late paying their rent.
They also tend to have fewer ties to the area, so they're more likely to move out unexpectedly. It may be that they're pursuing a better job, or that they've lost their job, or whatever. Regardless, when you rent to people with less income you're chance of having them skip out are higher. This all adds to the risk.
2. Cost - The cost of administering a rental property is roughly constant, regardless of the size of the unit. A $10 per month cost is a bigger percentage of a $500/mo. unit than a $1500/mo. unit.
Likewise maintenance costs are higher in the slums. This is largely due to the poor condition of the units. You can argue that an investment in improving the units would pay back in lower costs and higher possible rents, but that's not always possible. (And when people DO make those improvements they're often beat up for "gentrification" of the neighborhood.)
Consider the above when you're pricing your own products. Do you want to play in the "few sales, low margin, high dollars" arena, or the "many sales, high margin, low dollars" area?
As an example, in my shop scooter sales carry the business. These are few sales, relatively low margin, but big dollars so I make most of my profits selling them.
On the other end of the spectrum are helmet sales. I sell many more helmets than I do scooters, and at a better profit margin, but the total dollar volume is much lower so my profit DOLLARS are lower.
And PROFIT is the name of the game!
Kurt Schweitzer
Urban Village ScootersPrivate Reply to Kurt Schweitzer | | Dec 12, 2008 3:30 pm | | re: re: re: re: re: re: re: Merrill CEO bonus is 'shocking' | # |
Scott Wolpow | | People who live in lower income areas [Slums is very insulting term why did you use it?] have no choice. Because they have no credit they can not move to better areas.
The landlords know this and charge more.
There is also what Kurt says, the buildings get abused more and rent is often not paid at all. In other cases they are paid by the city at a lower rate than what is asked.
This is what inspired the 70's activist to change teh way loans are made. BTW the insurance company also redlined the same areas, so no car insurance, homeowners etc or very costly.Private Reply to Scott Wolpow | | Dec 12, 2008 7:59 pm | | re: re: re: re: re: re: re: re: Merrill CEO bonus is 'shocking' | # |
Kurt Schweitzer | | I forgot to mention housing subsidies. Here in Rochester we have something called "Section 8", which is a program where the city or county (I forget which) pays the rent on behalf of the tenant, up to some maximum number of dollars. Smart landlords will set their rent to the Section 8 maximum or higher, and then rent to low income people.
The big advantage is that you ALWAYS get paid on time (and the check never bounces). The disadvantages are having to deal with more inspectors, the fact that there's no way to pressure the tenant if they're causing trouble, and a really long, expensive eviction process. Plus if the tenant skips you have no security deposit to hold or use to cover damages.
I hated being a landlord. Retail is much more fun!
Kurt Schweitzer
Urban Village ScootersPrivate Reply to Kurt Schweitzer | | |
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