It turns out the billions in dollars in bonuses paid out by Merrill Lynch even as its new owner, Bank of America, was lobbying for more bailout money weren’t the only questionable payments the firm made late last year.
BusinessWeek reports:
On Nov. 13, just three weeks before Merrill shareholders voted to approve the merger with BofA, Merrill’s former board approved the payment of 35 cent-a-share dividend to all common stockholders. The payout drained another $565 million from Merrill’s coffers at a time when the firm should have been building up cash, instead of spreading it around.Now sure, one could argue that if Merrill had slashed the dividend to the bone, the brokerage’s stockholders may not have voted for the merger with BofA. But Merrill’s dividend payout came just weeks after Bofa announced on Oct. 6 it was slashing its dividend in half to 32 cents-a-share—a move the bank said would save it some $1.4 billion in cash each quarter. (The bank has since cut the dividend to a penny-a-share).
The magazine also offers an important, if obvious-when-you-think-about-it corrective to the fast-emerging narrative that Bank of America knew nothing about Merrill’s huge fourth quarter losses until mid December (and had no reason to know any sooner.)
Says Bizweek:
Anyone with inside knowledge of Merrill’s investment portfolio could have seen that the brokerage’s investments in corporate loans and commercial real estate-related securities would all take a hit in the fourth-quarter. And that includes Thain & Co., as well as Lewis’ team at BofA, which was conducting its due diligence on Merrill at the time.
No one comes out of this looking good.