Anger as Bank of America withholds bonuses after $4 billion Merrill payout

Merrill Lynch under investigation by New York attorney general over its $4 billion bonus payout

NEW YORK & CHARLOTTE, NC - News that Bank of America (BofA) will withhold bonus payments of more than $50,000 to investment bank employees has inflamed the tension between BofA staff and those of Merrill Lynch, who were paid $4 billion in early bonuses, only days before BofA completed its purchase of Merrill Lynch on January 1.

Bank of America employees that were to receive bonuses of more than $50,000 will not get a year-end bonus for 2008, but will receive the deferred payments in one-third increments in 2010, 2011 and 2012, according to a report in the Financial Times.

New York attorney-general Andrew Cuomo is already investigating Merrill Lynch chief executive John Thain's decision to accelerate the payment of $4 billion in bonuses before the BofA takeover, the deal for which was completed in principle in September 2008. Merrill then passed the buck for $15.8 billion in 2008 losses over to BofA, which has since been forced to seek a $20 billion US government recapitalisation as well as Treasury guarantees for $118 billion in bad debts.

Part of that bailout package restricts BofA from paying out bonuses to its employees - remuneration restrictions from which Merrill was immune during its final days of independence. Cuomo already issued a subpoena on January 27 and is keen to grill Thain over the bank's rushed $4 billion payout.

Bank of America boss Ken Lewis described the Merrill takeover as "the deal of a lifetime" when initially struck last September. It is understood Lewis paid close to $20 billion to acquire Merrill Lynch - once Wall Street's largest brokerage.