Merrill Lynch chief executive forced out over bonus row

New York - The hangover of Bank of America's (BoA) shotgun wedding to Merrill Lynch organised in September 2008 continues. John Thain, the chief executive officer of Merrill Lynch until its formal takeover by BoA on January 1, was sacked as a result of bad publicity surrounding a decision to pay Merrill executives $4 billion in employee bonuses one month early, at the end of December.

Thain, who maintains BoA was fully aware of the decision and involved in discussions, also received additional negative publicity thanks to the leaking of the $1 million cost of the refurbishment of his Merrill Lynch office. According to press reports, BoA says it was informed of the decision to give bonuses early, but was not party to it.

The bonus news came on the heels of BoA's announcement of a $15.3 billion loss related to its acquisition of Merrill Lynch. Although BoA had announced profits of $4.01 billion for 2008, the Merrill Lynch loss had already forced it to apply for debt protection from the US Treasury.

BoA's 2008 results include its purchase of Countrywide Financial on July 1 2008, but not the Merrill deal, which took place officially on January 1, 2009.

The Treasury and Federal Deposit Insurance Corporation (FDIC) has offered to guarantee $118 billion of debt held by Bank of America in loans, securities backed by residential and commercial real estate loans and other assets, marked to current market value. The Treasury is also investing a further $20 billion directly through its Troubled Asset Relief Program in exchange for preferred stock, offered with an 8% dividend.