BofA Pays Out: So Much for the 'New Normal'

Ken Feinberg isn’t going to be happy about this:

Bailed-out Bank of America (BAC) has been doling out millions in bonuses in an effort to lure talent and keep investment bankers who management views as vital . . .

Among those who are said to have received payouts are two former Merrill Lynch bankers, Fares Noujaim, who was recently appointed as BofA's vice chairman of investment banking, and Harry McMahon, a well-connected West Coast-based banker. Both were offered guarantees not to leave the firm.

Noujaim, a former Bear Stearns banker who joined Merrill last year, is said to have received roughly $15 million over two years.

Sources say Noujaim -- a well-regarded banker focusing on the Middle East -- was offered a vice-chairman role, and may have been offered at least $5 million more to stay. [Emph. added]

I can hear the squawking in Washington already. . . . So much for the “new normal.” I don’t think Ken Lewis would be insulted (or even quibble) if I noted that he’s likely the cheapest CEO on Wall Street. If even Lewis is willing to lay out this kind of cash to keep key people, it’s a pretty good bet that he’s paying what the market demands, but no more. .

Comments

[Rightly right:]

You should pause for a moment of clarity. Mr. Ken Lewis may be the "cheapest" CEO on Wall Street, based on some definition of "cheapest"; but I can't figure out what it is. He seems not to have yet met an acquisition he didn't want to do for a price that was higher than needed to effect the acquisition, having overpaid enormously both for Countrywide and Merrill Lynch; and he seems to have no problem with refusing to do fund raising via rights offerings in which shareholders will not be unnecessarily diluted instead of unnecessarily paying substantial underwriting discounts and commissions in connection with firmly underwritten offerings to the general public in which already existing, long suffering shareholders aren't even given the opportunity to participate, let alone the first bit at the applie (as they should be). Interestingly, I was unable to get an answer from investor relations as to whether there also was a MAC out provision in the Countrywide agreement, if not, why not, and, if so, why it wasn't exercised (since there clearly were material adverse changes between the time the agreement for that deal was signed and the time of consummation). Should Lewis really be characterized by anyone with a grain of common sense as the "cheapest" CEO on Wall Street when he blatantly disregards shareholder interests in this manner, and, on top of if, fails to disclose the detiorating condition of Merrill Lynch before the acquisition is consumated instead of making full and fair disclosure to shareholders and using the MAE out clause provision in the Merrill Lynch acquisition agreement either to renegotiate far more favorable terms or terminate the deal? I think the answer clearly is a resounding NO.

Jun 19 11:40 AM