Merrill’s giant bonuses give Cuomo a bonus, too

New York Attorney General Andrew Cuomo has powers vast and wide. But for him to go after Merrill Lynch & Co. for passing out bonuses is a bit of a stretch.

I say, go for it anyway.

The grounds he gives are easy to articulate and far harder to stand on. New York’s broad security law, the Martin Act, and the possibility that funds were fraudulently conveyed sound good but probably won’t let him nail the folks he’s after.

If Merrill lied to Bank of America Corp. or Merrill shareholders or directors in some demonstrable way, then maybe Cuomo would have a basis to prosecute for fraud. So far there is no evidence of that.

Cuomo himself seemed to concede as much when he publicized his findings and forwarded them to House Financial Services Committee Chairman Barney Frank on the same day that eight bank presidents came in for a televised knuckle-rapping.

There is every reason to suspect that Cuomo is following his predecessor, Eliot Spitzer, in whipping these boys to impress the electorate. For all his huffing and puffing, Spitzer lost his try to recoup the $190 million package the New York Stock Exchange gave its departing chairman, Richard Grasso.

I don’t care.

To whatever degree Cuomo is showboating, he is also informing the folks who helped pay for Bank of America to swallow Merrill, meaning us. And his letter should prod Congress, which hasn’t exactly been jumping up to safeguard the bailout money it dug into our pockets to so generously offer.

The televised finger-wagging Frank’s committee administered to the CEOs this week hardly gave full voice to the fury of Americans trying to hold onto home and job against the tug of economic turmoil these very men helped create.

That same day, to get the stimulus package passed, Congress gave up a provision that would have forced companies benefiting from Troubled Asset Relief funds to pay back to the government any bonus they hand out over $100,000.

So I can forgive Cuomo if the Merrill bonuses give him a political boost, which surely they do. At least he nailed down the timing and amounts of what was handed out. He called the bonus frenzy a “fit of corporate irresponsibility.”

With documents subpoenaed from Merrill, Cuomo learned just how bogus was the claim that the $3.6 billion it showered on employees at year-end was actually quite modest. Spreading the largess over the bank’s 39,000 workers makes for an average bonus of a mere $91,000, Merrill’s defenders pointed out.

Most Americans would hardly call a $91,000 bonus modest, by the way. Median household income in the United States was $50,233 in 2007, the U.S. Census Bureau reports. That’s income. Per household.

Cuomo’s point was the lopsided way the $3.6 billion was distributed, making any averaging of the total deceptive.

Almost 700 Merrill employees got at least $1 million. At the top of the chain were four executives who split up $121 million.

Now, that’s a number worth averaging: more than $30 million per person. Let’s see what it would buy.

It would cover what the University of Alaska in Fairbanks expects to spend building a 31,000-square-foot center for research into energy of all forms.

General Motors Corp. says it plans a $30 million outlay to retool one of its plants to mass produce batteries to power its much-touted new hybrid, the Volt.

A top bonus for a Merrill executive would easily cover the $24 million the Department of Housing and Urban Development is sending to New York City to help it buy and fix up foreclosed or abandoned property under the Neighborhood Stabilization Program.

If all four pitched in, they could cover HUD’s Neighborhood Stabilization grant to the state of Florida and still have $30 million left over.

That’s a lot of money.

Merrill knew it was, and so rushed it out the door weeks early before Bank of America took over on Jan. 1, and weeks before Merrill reported a $16 billion quarterly loss.

To those who insist that it’s the feds who should be looking into this sort of thing, the point is that state attorneys general tend to show up in voids federal agencies leave open. Spitzer jumped into a void, and Cuomo found a vacuum stronger still.

He may not have the power to punish the folks who snatched that money out of Merrill. But at least now they can’t sneak off in the night with it. If Cuomo gets credit for that, at least it’s a bonus he earned.

 

Ann Woolner is a Bloomberg news columnist.