Remember the latest Bank of America (BAC) bailout, the one we were all so steamed about last week? (The $20 billion of cash and $100+ billion of trash-asset guarantees that absolutely had to be given or else Bank of America shareholders might have lost everything?)

Yes, well, you probably thought that that cash would be used to bolster the bank's capital or something. (We know you weren't dumb enough to think it might have been used to make loans).

Alas, it wasn't used for that. It was used to pay Merrill Lynch executives the huge bonuses they deserved for unloading their balance sheet on for-some-reason-not-yet-fired Bank of America CEO Ken Lewis.*

Has change really come to America? We'll believe it when we see it.

See Also: Merrill Pays Itself Huge Bonus For Snookering Ken Lewis

*BOFA will say that the cash used to pay the bonuses was not the actual cash received from taxpayers. Please. Cash is cash. What BOFA and Merrill are already saying in their defense is that the bonuses were accrued (and mostly paid) all year and that Merrill just shelled out the last $4 billion in December...a month before the latest bailout funds arrived.



But that's ridiculous.



By the time it paid its bonuses, Merrill knew about the $21 billion of operating losses for the quarter and Ken Lewis and BOFA knew they would need more capital. Bonuses are supposed to be based on the full year's performance, so the Q4 losses should have reset the bonus pool for the whole year. If most of the bonuses really were paid prior to December (which would be highly unusual--it's almost always a one-time lump sum), then at the very least, the last payment should have been stopped.



Meanwhile, if Merrill hadn't paid out $15 billion in bonuses, Bank of America presumably would only have needed $5 billion from taxpayers, not $20 billion.

And in case you're beginning to have sympathy for BOFA's argument that "bonuses weren't paid with actual taxpayer cash," recall that BOFA has ALREADY RECEIVED $25 billion in taxpayer funds, $10 billion of which were for Merrill. So Merrill used all of the original $10 billion PLUS $5 billion of the latest $20 billion to pay bonuses. Now are you mad?