Last year, Merrill Lynch agreed to take $10 billion in TARP funds and suffered losses of $27 billion last year. It promptly paid $3.6 billion in bonuses, blowing an even larger hole in its balance sheet. Bank of America eventually received $20 billion in additional TARP funds to assist in its acquistion of Merrill.

This is old news, but it's also a stunning reminder of how a program that was ostensibly designed to steady the financial system was used to pump up the bank accounts of Wall Street executives.

This level of compensation, approved at the urging of then-CEO John Thain, was simply looting. It represents a diversion of public money into private pockets without any justification.



If Merrill Lynch would have fallen apart without paying its employees one-third of its TARP funds—far higher than any other bank in the report—it should have been permitted to die. It had already been acquired by Bank of America, and it’s fading from the scene would have posed no systemic risk.



To put it differently, that $3.6 billion did not remain with the firm as capital. It was a number that Merrill Lynch did not need to meet regulatory capital requirement or to pay creditors or counter-parties. It was just a wealth-transfer--straight from taxpayers to the Americans who needed it the least.