Bonus bonanza won’t heal BofA/Merrill divide

January 11, 2010

Bank of America’s crew on Wall Street can breathe a sigh of relief. It looks like the Charlotte-based bank is set to hand out 2007-like bonuses to all its investment bankers and traders. If so, that will prevent a repeat of last year’s mess when Merrill Lynch staff scored big in the firm’s last bonus round as an independent company – while their new BofA colleagues got squat. But leveling the bonus playing field is not a cultural cure-all.

There’s no guarantee this will remove the lingering resentment the two-tier pay muddle caused. But even if that’s no longer an issue, it requires more than better bonuses to heal the wounds inflicted when two former rivals are forced together. It took years before tensions settled down after Chase bought JPMorgan, for example. In the latter case, last year’s ousting of investment bank co-chief Bill Winters exposed raw merger nerves long considered soothed.

That’s not all. Bumper bonuses might be enough to keep some from actively seeking new employment. But that won’t stop rivals from aggressively knocking. Newly appointed BofA boss Brian Moynihan failed to inspire many of Merrill’s dealmakers during his short stint running the investment bank. And with ex-Merrill brass in senior positions elsewhere – including Greg Fleming at Morgan Stanley – BofA Merrill remains fertile poaching ground.

Washington could play a part, too. BofA could fork over $15 billion to bankers, traders and wealth managers for 2009, based on estimated revenue figures and Merrill’s 2006 ratio of compensation to revenue. There’s a good chance lawmakers and regulators will find that too much for a bank that has only just paid back the $45 billion of taxpayer aid that kept it standing – and which lost money in each of the first three quarters last year after stripping out one-off items.

Equalizing bonuses certainly makes sense. But BofA has a long way to go before the combination with Merrill fulfills expectations.


We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see

This article is slightly insulting. BofA bankers can “breathe a sigh of relief”! While the majority of our recessionary world is struggling to stay alive, these bankers are crying over some other guys bonus! It’s infuriating that the author of this article seems to think that it is acceptable to behave this rash in todays world. Plainly, it is irresponsible for both the author and the bankers to behave the way they are described to be in this article.

Posted by greatguyindeed | Report as abusive

If they put the the money collected to pay bonuses into better use such as credit to their business customers that would help stir growth and hiring and thus alleviate the economy from the current dire shape it is in.This stimulus will not only help the economy but with it the overall health of the banking and financial sector.It will also help stem the public indignation and wrath directed towards this sectors pay policies.

Posted by schadha100 | Report as abusive