- The Washington Times - Thursday, January 22, 2009

NEW YORK (AP) — Media reports Thursday said former Merrill Lynch & Co. CEO John Thain has resigned from Bank of America Corp. following news that Merrill had moved up its year-end bonuses, paying them just before BofA’s government-brokered acquisition of Merrill was completed.

CNBC and the Wall Street Journal’s Web site reported that Mr. Thain resigned after a meeting with Bank of America executives Thursday morning. A Bank of America spokesman declined to comment. Mr. Thain was heading a wealth management division of the two firms’ merged businesses.

The bonuses to Merrill Lynch executives also were paid out as the company prepared to report a $15.45 billion fourth-quarter loss — a loss that led Bank of America to request and receive $20 billion in additional government bailout money. Merrill also received bailout funds.

Charlotte, N.C.-based Bank of America increasingly has come under criticism in recent weeks for its acquisition of Merrill Lynch, a deal fostered by the government to save Merrill Lynch on the same day that Lehman Bros. Holdings Inc. collapsed amid the ballooning credit crisis. On Thursday, Bank of America said it knew of Merrill’s plans to more up the bonuses.

“Merrill was an independent company until Jan. 1 of 2009,” said Bank of America spokesman Scott Silvestri. “John Thain decided to pay year-end incentives in December, as opposed to their normal date in January. Bank of America was informed of his decision.”

Bonuses were not paid, though, to Mr. Thain and four other top executives — President and COO Greg Fleming, Chief Financial Officer Nelson Chai, President of Global Wealth Management Robert McCann, and General Counsel Rosemary Berkery — who requested they not receive additional compensation.

The bonuses raise the question of how proper it was for executives in a struggling company to be given big payouts even as its soon-to-be-parent was accepting billions of dollars in government money. Bonuses are widely seen in the investment banking industry as necessary to retain top performers, but the fact that they were granted while tens of thousands of jobs were being eliminated across the securities and banking industry raises another question: How necessary were they to prevent defections?

Although Mr. Thain’s departure appeared to be linked to the bonuses, which were first reported in the Financial Times, some analysts expected him to leave at some point anyhow. When two huge companies link up, the usual turn of events is that one of the CEOs from the standalone companies departs.

“It’s hard to see Ken Lewis and John Thain together in a working relationship,” said Gary Townsend, president of private investment group Hill-Townsend Capital. “Thain is the quintessential Wall Street fellow. Lewis spend a lot of time on Wall Street and hated the experience.”

Shares of Bank of America, which were already tumbling Thursday, initially fell further after reports of Mr. Thain’s departure, but regained a little bit of their ground. Bank of America shares fell 88 cents, or 13.2 percent, to $5.80 in afternoon trading.

Bank of America shares have been among the hardest hit in the sector throughout the first few weeks of 2009. Its shares had already sunk 52.6 percent in 2009 before Thursday’s fall.

Bank of America last week struck a deal with the government to receive an additional $20 billion in funds as part of the Treasury Department’s bank investment program. The government also agreed to backstop losses on additional assets as Bank of America absorbs struggling Merrill Lynch. The investment comes after Bank of America already received an initial $25 billion as part of the program. Merrill Lynch received $10 billion in October.

Mr. Thain went to Merrill Lynch, which like other financial companies was struggling because of its investments in soured mortgage back securities, after leading the New York Stock Exchange. Before that, he served as chief operating officer at Goldman Sachs Group Inc.

Associated Press writer Ieva M. Augstums reported from Charlotte, N.C.


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