Merrill Lynch CEO Never Considered Disclosing 2008 Fourth Quarter Losses Or Bonuses

Last week, former Merrill Lynch CEO John Thain faced six hours of questioning from New York Attorney General Andrew Cuomo regarding “the bonuses that were given out on the eve of Merrill’s merger with Bank of America (BoA).” Thain has evidently been directed by BoA not to discuss specific bonus details, so Cuomo has filed a motion in the Supreme Court of New York in order to get Thain to talk.

During the initial questioning, though, some other details about Thain’s attitude toward bonuses, and the financial crisis in general, were made quite clear. When Thain was asked if he ever considered “whether Merrill Lynch should disclose its [fourth quarter] losses to its investors,” he essentially said no:

THAIN: Merrill Lynch as a policy, doesn’t make projections; doesn’t give guidance and doesn’t disclose interim results.

Q: And a lot of firms have that and depart from that policy in times where there’s a serious deviation, and given the deviation that was occurring in the fourth quarter of 2008, did you consider whether or not it was appropriate to make a disclosure?

THAIN: The market conditions were generally known and we would not have disclosed interim results in that fourth quarter.

As for Merrill shifting when it paid bonuses, to have them out before BoA took over:

THAIN: I don’t think it’s necessarily the case that we can predict what was going to happen between December 8 and December 31. Again, I’m going to repeat what I said, that bonuses were determined based upon performance and the retention of the people, and there is nothing that happened in the world or the economy that would make you say that those were not the right thing to do for the retention and the reward of the people who were performing.

Remember, this is the same guy who “suggested to directors that he get a 2008 bonus of as much as $10 million” after Merrill incurred catastrophic losses and had to be salvaged by BoA.


As for rewarding “the people who were performing,” in the months before the merger between Merrill and BoA closed, “Merrill’s business deteriorated, resulting in a $15.3 billion post-tax loss in the fourth quarter.” This loss prompted BoA “to seek a second round of taxpayer money” just to stay afloat following the merger. That seems to fall short of a bonus-worthy performance.