Sun, Feb 01, 2009 page5

• Bank of America to defer bonuses over three years

  • BLOOMBERG
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  Bank of America Corp is deferring payment last year’s bonuses of US$50,000 or more at its capital markets and investment banking units over three years, people familiar with the matter said.

  Employees who had expected a bonus this month based on last year’s work will instead get most of it in three annual installments, starting in February next year, said the people, who declined to be identified because the plan isn’t public.

  A fraction of each bonus — perhaps less than 10 percent of the amount due — will be paid in quarterly installments this year, the people said.

  The Charlotte, North Carolina-based bank will pay interest on the remainder at the London interbank offered rate, or Libor, they said. The rate for three-month dollar loans on Friday was 1.18 percent.

  “This is historic,” said Jeanne Branthover, managing director in charge of global financial services for Boyden Global in New York, an executive search firm. “Employers can get away with anything right now because people are just happy to be employed.”

  Bank of America doesn’t comment on compensation plans, spokesman Scott Silvestri said.

  BUYING MERRILL

  The bank is slashing up to 35,000 jobs to achieve US$7 billion in annual cost savings after its purchase this month of Merrill Lynch & Co, the world’s largest brokerage. Bank of America won’t disclose how many of the cuts are occurring in its investment banking units.

  Merrill Lynch paid about US$3.6 billion in bonuses days before its sale to Bank of America was completed on Jan. 1, Fortune magazine reported on its Web site. New York Attorney General Andrew Cuomo is studying whether the payments violated securities laws, a person familiar with the matter said.

  Cuomo also wants to know what Bank of America chief executive officer Kenneth Lewis knew about the bonuses and Merrill’s US$15 billion net loss in the fourth quarter, the person said. Lewis, 61, fired Merrill’s CEO John Thain on Jan. 23.

  Lewis has said he won’t receive a bonus this year after the bank reported a US$1.8 billion loss in the fourth quarter, its first deficit since 1991. For the year, the bank earned US$4 billion while its stock price declined by two-thirds.

  The US Treasury agreed last month to provide US$20 billion in additional capital and US$118 billion in asset guarantees to Bank of America to help absorb losses at Merrill Lynch.

  OBAMA

  US President Barack Obama and Democrats in Congress are moving to cap Wall Street bonuses and pay. White House spokesman Robert Gibbs said I was “very safe” to assume that new rules guiding the administration’s financial rescue will address bonuses and executive pay.

  Obama lashed out at Wall Street on Thursday, saying it was shameful that employees were paid more than US$18 billion in bonuses while their crumbling financial sector received a historic bailout from US taxpayers.

  Obama was responding to reports that Wall Street executives were paid billions in bonuses last year as Congress poured hundreds of billions into the financial system to address an economy reeling from souring debt, defaulting mortgages and choked lending.

  With new Treasury Secretary Timothy Geithner at his side, the president said the payouts were “the height of irresponsibility.”

  The Financial Times reported on the bonus deferrals earlier, citing unidentified executives.

  MetLife Inc, the biggest US life insurer, said it was introducing a new pay-for-performance plan tied to profit over three years and how it compares with industry peers.

  Financial companies in New York City paid cash bonuses of US$18.4 billion last year, the sixth-highest in history, even as they posted record losses, data compiled by the office of state Comptroller Thomas DiNapoli said.
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