Barack Obama

What Obama Can Learn From JP Morgan CEO Jamie Dimon

Moe Tkacik | March 27, 2009, 2:17PM

Whatever the 25 bank CEOs descending upon the White House this morning told the president and his economic team, we hope JP Morgan CEO Jamie Dimon repeated one line from the speech he gave at the Chamber of Commerce earlier this month. (It's about 11:30 in.)

One of the main root causes [of the crisis], and this has been going on for a long time, was the huge trade and global financing imbalances which fueled very low rates and excess consumption, and over a long period of time I do not believe you can run those kind of trade deficits...

Dimon was getting at one of the root structural causes of the current crisis -- America takes, the world (China especially) makes, an unsustainable situation sustained above all by an increasingly usurous financial services industry. As the CEO of PNC Financial Services just pointed out, banking is the biggest sector of the American economy -- and it's been to the detriment of everything else.

And while that might seem obvious, intuitive even, Dimon's speech came just three days after Larry Summers told the Financial Times that the global trade imbalance wasn't the problem anymore, that it had been eclipsed by more pressing emergencies, etc. etc.

Naturally Dimon went on to condemn the demonization of Wall Street and corporate America.

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Bailout

Lawsuits: Lewis, B of A, Misled Shareholders On Merrill Deal

Zachary Roth | March 25, 2009, 5:26PM

This is just the headache that beleaguered Bank of America CEO Ken Lewis needs...

It looks like B of A is facing legal woes as a result of its hastily arranged deal to buy Merrill Lynch last fall, and its subsequent statements about Merrill's finances.

The Wall Street Journal reports (sub. req.):

Five public pension funds are seeking lead status in a class-action suit against Bank of America Corp., alleging that the nation's largest bank by assets made "untrue statements" in the run-up to its purchase of Merrill Lynch & Co. and did not disclose material information to shareholders.

The funds claim to have lost $274 million on their Bank of America investments between July 21, 2008 and Jan. 20, 2009.

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AIG

Cuomo Has Names Of AIG And Merrill Bonus Recipients

Zachary Roth | March 20, 2009, 4:13PM

It looks like Andrew Cuomo holds all the cards. He now has in hand the names of the recipients of both of the corporate payouts that have provoked all that populist rage lately.

A judge earlier this week ruled that Bank of America had to turn over the list of names of the 200 highest-paid Merrill Lynch bonus recipients, that the New York Attorney General has been seeking. According to reports, B of A, which now owns Merrill, did so yesterday.

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AIG

Cuomo: I'll Release Names Of AIG Bonus Recipients

Zachary Roth | March 19, 2009, 10:23AM

It hasn't gotten much attention, but New York Attorney General Andrew Cuomo said yesterday that he'd publicly release the names of the AIG bonus recipients, reports the New York Times.

Cuomo is investigating the payouts, as well as those made by Merrill Lynch and several other Wall Street firms. He issued a subpoena for the AIG names earlier this week.

His declaration followed the news that a court has ruled that Bank of America, which owns Merrill, must give him the names of the Merrill recipients. That ruling suggests that Cuomo will likely also get the AIG names. AIG lawyers had referred frequently to the Merrill case this week, and had delayed giving Cuomo the names pending the outcome of that case.

Yesterday, AIG CEO Edward Liddy declined to assure Congress he would cooperate fully with Cuomo's probe, citing concern for the physical safety of employees who received bonuses, were their names to be made public.

Bank of America

Court: B of A Must Reveal Names Of Merrill Bonus Recipients

Zachary Roth | March 19, 2009, 9:52AM

While we've all been focused on those AIG bonuses, there's been a major development in the Wall street bonus saga that seemed, a week ago, like the ultimate in outrageous corporate behavior.

A court ruled yesterday that Bank of America will have to turn over to New York Attorney General Andrew Cuomo the names of the Merrill Lynch employees who received a total of $3-4 billion in bonuses. Bank of America, which since the start of the year has owned Merrill, had been resisting giving Cuomo the information.

Cuomo said he could release the names as soon as today.

Merrill approved the bonuses last December under then-CEO John Thain, on an accelerated schedule, apparently to ensure they went into effect before the firm came under the control of B of A.

Bank of America

B of A: We Care About Privacy (When It Comes To Bonuses, That Is)

Zachary Roth | March 13, 2009, 11:47AM

The judge who will decide whether information about those Merrill Lynch bonuses should be made public has said he'll make a decision within the week, Bloomberg reports.

New York Attorney General Andrew Cuomo is investigating the bonus awards, which reportedly total $3-4 billion. Bank of America, which now owns Merrill Lynch, has refused to disclose to Cuomo which Merrill employees received the awards, and how much each got.

But we particularly liked this argument from B of A's lawyer, Evan Davis, made to Judge Bernard Fried:

Americans care about their privacy. That matters to us because if we don't try to protect it and succeed in protecting it we'll lose them to foreign banks.

Aah yes, Bank of America: famed protector of privacy. When the subject is executive bonuses, that may be true. When its customers' personal information, maybe not so much.

Bailout

Congress Probing Merrill For Obstructing Bonus Investigation

Zachary Roth | March 12, 2009, 1:44PM

The House Oversight Committee has launched an investigation into whether Merrill Lynch misled it when the firm told the committee, in a letter sent last November, that no decisions had been made on bonuses.

As we noted earlier today, New York Attorney General Andrew Cuomo, who is probing the bonuses, included the letter, dated November 24, in court filings made yesterday. Cuomo also included testimony from a Merrill director, saying that the firm decided November 11th to award bonuses that December. Cuomo, who is trying to persuade a judge to compel Bank of America to disclose information on the bonuses, suggested that the testimony implies Merrill's letter was designed to mislead the committee, which was conducting its own invesitgation of the bonuses, and was chaired at the time by Rep. Henry Waxman (D-CA).

Congress rarely takes kindly to being misled, and this appears to be no exception. The committee's current chair, Rep. Ed Towns (D-NY), today issued a statement asserting that the Cuomo filings "raise the disturbing possibility that Merrill Lynch executives may have obstructed this Committee's investigation," and adding that Towns had directed committee lawyers to begin a "detailed investigation of this allegation."

Lying to a Congressional investigation, even in a letter, could potentially lead to perjury charges. There's an important difference between misleading and lying, however, and neither Cuomo nor Towns have accused Merrill of the latter.

Still, things are getting interesting...

The full statement from Towns follows after the jump ...

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Andrew Cuomo

Cuomo: Merrill Misled Congress On Bonuses

Zachary Roth | March 12, 2009, 11:18AM

It looks like Andrew Cuomo has escalated things in the Merrill Lynch bonus probe.

Cuomo is now accusing the firm of misleading Congress on the matter. In a court filing made yesterday, according to the Wall Street Journal, Cuomo included a November 24th letter, sent by Merrill to a House oversight committee, assuring lawmakers that no decisions on yearly bonuses had yet been made. Cuomo also filed testimony from a Merrill director, saying that on November 11th, the firm's compensation committee had decided that Merrill would pay bonuses in December, rather than January, when bonuses were usually paid (and when the firm would be under the control of Bank of America.)

Cuomo is trying to convince a judge to force Bank of America to disclose information about who got the bonuses -- which the company has so far been refusing to do.

The House Oversight committee, chaired at the time by Rep. Henry Waxman (D-CA), had asked Merrill for information on the bonuses, as part of an effort to ensure that the firm wasn't using bailout money for compensation.

There's another interesting nugget in the Journal's report:

Mr. Cuomo also disclosed that John Thain, Merrill's chairman and chief executive, was told that he would lose any chance of succeeding Kenneth Lewis as CEO of Bank of America if Mr. Thain kept pressing Merrill directors last fall for a 2008 bonus of as much as $40 million.

"He was told very strongly that you should not do that; that you would damage yourself with the Bank of America board if you do that, and if you ever wanted a chance to be in the running for my job, then that would eliminate it," Mr. Lewis said in his testimony last month, according to the filing.

Thain soon lost his chance to succeed Lewis anyway, as he was ousted in mid January amid anger over the bonuses and Merrill's massive fourth quarter losses.

Bank of America

Schumer Wants Probe Of Theresa Hatt Phenomenon

Zachary Roth | March 11, 2009, 11:38AM

From TPMmuckraker to the U.S. Senate. Kind of.

Remember our story from last month about how a Bank of America estates rep tried to guilt-trip the son of a deceased card-holder into paying his mother's credit-card balance, though he was under no obligation to do so?

Well, as we noted last week, the New York Times seemed to like it -- following up with their own report on debt collecting firms that contract with the credit card companies to go after the relatives of deceased card-holders, many of whom don't understand that they're usually not obligated to pay the debt.

And now, according to a press release, Sen. Chuck Schumer (D-NY) has called on the Federal Trade Commission to investigate the "deceitful practice that preys on relatives who have no legal obligation to pay their deceased loved ones' bills."

The release says Schumer's call "came on the heels of a high-profile published report last week exposing this practice," -- a reference to the Times story, which appeared to be triggered, in turn, by our own story.

According to Schumer, the practice may already be illegal under existing law, since the Fair Debt Collection Practices Act "prevents the collection companies from contacting anyone other than the debtor about outstanding bills".

He suggests that, at the least, debt collectors should be required to tell the relatives that they aren't legally obligated to pay the debt at issue.

That seems like the least that could be done.

Schumer's full letter to the FTC follows after the jump ...

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Bank of America

B of A: Revealing Merrill Bonus Info Would Cause "Irreparable Harm"

Zachary Roth | March 6, 2009, 11:07AM

We didn't get to this yesterday afternoon... but it looks like Bank of America is going to the mat to avoid telling Andrew Cuomo's investigation who got those controversial Merill Lynch bonuses.

B of A, reports Bloomberg, filed court documents yesterday claiming that revealing the identities of the lucky bonus recipients would cause "grave and irreparable harm" to the firm, because it would let competitors know which areas of B of A's business the company considers most valuable, and would therefore make it easier to steal B of A's top talent. It would also create "internal dissension and consternation," and could even create security risks for those named.

In other words, if it became known who we gave huge bonuses to in a year when Merrill collapsed, people would be so mad they'd physically attack them.

Does any of this even pass the laugh test?

Former Merrill CEO John Thain has already talked to Cuomo's team about the bonuses, after a judge ordered him to do. But its not clear what he said. B of A CEO Ken Lewis refused last week to turn over a list of who got the bonuses.

Merrill gave out the awards on an accelerated schedule last December, just weeks before the failed firm came under the control of B of A. Thain has since been fired.

Andrew Cuomo

Cuomo Subpoenas More Of Merrill's Top Earners

Zachary Roth | March 5, 2009, 1:45PM

Yesterday, we noted a report in the Wall Street Journal that Merrill Lynch's top ten execs were each paid more than $10 million last year. The ten made slightly more than the top ten earners for 2007, despite the company's collapse last year.

Now, the Journal follows up by reporting that several of those execs have been subpoenaed in New York Attorney General Andrew Cuomo's investigation into Merrill's awarding of billions in bonuses.

Among the group are Andrea Orcel, who was Merrill's top investment banker, Thomas Montag, who led global sales and trading, and Peter Kraus, who ran strategy. They all now work at Bank of America, which took over Merrill after its collapse.

Another of the top ten, former Merrill CEO John Thain, has already spoken to Cuomo's investigators.

Bank of America, whose role in the bonus fiasco is also being scrutinized by Cuomo, filed a court petition yesterday to try to keep the pay information secret. B of A CEO Ken Lewis reportedly refused to answer investigators' questions on the subject when he met with them last week.

Bank of America

Merrill's Top Ten Earners Made More Last Year Than In 07

Zachary Roth | March 4, 2009, 1:23PM

"While Merrill staggered, 11 top executives were paid more than $10 million in cash and stock last year, say people familiar with the situation," reports the Wall Street Journal.

Amazingly, the top ten earners at the company in 2008, according to the paper, made slightly more than the top ten in 2007: $209 million, up from $201 million.

Remember, as you think about that, what happened to Merrill last year. It collapsed -- so wrecked by its investment in toxic mortgage assets that it had to be taken over by Bank of America. Then, even after that deal had been announced, it absorbed such massive fourth quarter losses that B of A needed $20 billion from the Treasury to digest Merrill.

None of that, of course, stopped Merrill, under then-CEO John Thain, from dishing out billions in bonuses late last year -- a decision currently being probed by New York Attorney General Andrew Cuomo.

On that front, the WSJ reports that B of A plans to file a court motion today to try to keep the compensation data from becoming public. But Cuomo will counter with his own motion arguing it should be released.

The paper also has some good thumbnails of these high-rollers:

Thomas Montag: Started as head of global sales and trading at Merrill in August and now heads global markets at Bank of America. He was handed a $39.4 million pay package and Merrill stock awards valued at approximately $50 million. The stock awards were issued to replace stock he held in Goldman Sachs Group Inc., his previous employer.

Andrea Orcel: A top Merrill banker who now heads international corporate and investment banking for Bank of America. He got $33.8 million in 2008, down from approximately $36 million in 2007. His 2007 package included a special $12 million bonus for advising Royal Bank of Scotland Group PLC and other acquirers of ABN Amro Holdings NV, a now-troubled deal.

Peter Kraus: Hired as head of strategy at Merrill in September and was given a $29.4 million contract and Merrill stock to replace his holdings in Goldman, where he used to work. He is now the chief executive officer of investment management firm AllianceBernstein. (Ed note: We wrote about Kraus's $37 million Park Avenue apartment here.)

David Gu: Head of rates at Merrill; now heads global rates and currencies at Bank of America. He made $18.7 million in 2008, down from $19.8 million in 2007.

David Goodman: Co-head of global commodities at Merrill and Bank of America. Got a two-year employment guarantee from Merrill in 2007, paying him $16.5 million in 2007 and another $16.5 million in 2008.

Bank of America

NYT On The Theresa Hatt Phenomenon

Zachary Roth | March 4, 2009, 11:37AM

It looks like the New York Times liked our Theresa Hatt story.

That was the one about how a Bank of America estates rep tried to guilt-trip the son of a deceased card-holder into paying his mother's credit-card balance, though he was under no obligation to do so. We also spoke to a former B of A collections rep, who told us such techniques were encouraged.

And today the Times reports on a debt-collection firm that contracts with credit-card companies to go after the relatives of people who died with outstanding debts.

The paper makes clear that in most cases -- like the one we highlighted -- the relatives have no legal obligation to pay up. Not that that's made clear, of course:

Scott Weltman of Weltman, Weinberg & Reis, a Cleveland law firm that performs deceased collections, says that if family members ask, "we definitely tell them" they have no legal obligation to pay. "But is it disclosed upfront -- 'Mr. Smith, you definitely don't owe the money'? It's not that blunt."

Collection agents at the firm, DCM, use some sophisticated techniques.

New hires at DCM train for three weeks in what the company calls "empathic active listening," which mixes the comforting air of a funeral director with the nonjudgmental tones of a friend. The new employees learn to use such anger-deflecting phrases as "If I hear you correctly, you'd like..."

"You get to be the person who cares," the training manager, Autumn Boomgaarden, told a class of four new hires.

Often, they succeed:

Brenda Edwards, one of DCM's top collectors, spoke with a woman in New Jersey about her mother's $544.96 credit card bill.

"She had no will, no finances, nothing," the daughter said. "Nothing went to probate." The $200 in the checking account was used for funeral expenses. But the woman also said the family "filed a form with the county," indicating that perhaps there was a legal estate after all.

"Is anyone in the family in a position to pay this?" Ms. Edwards asked, adding: "I'm not telling you it needs to be paid at all."

The woman reached a decision. "I will talk to my brothers and sisters and we will pay this," she said.

DCM's chief executive makes clear that right now, collecting even on small debts is crucial for credit card behemoths. "The financial services industry is under a tremendous amount of pressure, and every dollar we collect improves their profitability," he tells the Times.

But given the parlous state of the industry, those collectors had better be working overtime.

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Topics: Bank of America, Financial Crisis, Wall Street

Bank of America

B of A's Lewis: Actually, Taking Public Money Was A Mistake

Zachary Roth | March 2, 2009, 4:34PM

Ken Lewis, the embattled Bank of America CEO, has told the Financial Times that taking $20 billion of government money to help it digest Merrill Lynch's losses was a "tactical mistake."

Lewis told the paper that the move made B of A appear as weak as Citigroup.

He also said that he intended to stay on atop B of A until the firm had paid the government back the $45 billion in total it has received from taxpayers, saying that could happen in 2-3 years.

Lewis has seen calls for his resignation over the mishandled Merrill merger. Merrill's massive losses in the fourth quarter of 2008 forced B of A to go to the federal government for help. Merrill's billion-dollar bonus awards, which are currently being probed by New York Attorney General Andrew Cuomo, have not helped the situation. Lewis recently stayed mum when questioned by Cuomo's investigators about what he knew about the bonuses.