In the news earlier in the week, New York attorney general Andrew Cuomo accused Merrill of misleading Congress about bonuses:
Merrill Lynch & Co may have misled Congress in representing last November that it planned to pay out bonuses at year end, when in fact it decided to accelerate those payouts, New York Attorney General Andrew Cuomo said on Wednesday.
He added that [emphasis mine]:
The attorney general also said Merrill traders may have delayed taking hefty losses late last year until after the company decided to pay out $3.62 billion of overall bonuses.
I qualify these remarks with the disclosure that I worked at Merrill’s research department until early 2007 and I don’t personally know any of the people involved.
There are ways of showing a profit and temporarily hiding losses in complex derivative books, but Cuomo’s accusations of traders manipulating their own P&L for to boost their own bonuses is a serious charge. It is certainly possible given this characterization of investment bankers, the obscene bonuses paid before the BofA takeover and how risk is managed at investment banks. I believe that the business model of Wall Street i-banks needs reform, but for Cuomo to level these charges without substantiation seems like a case of politically piling on to me.
We need specifics, Mr. Cuomo. Who? When? What did they do?