The chairman of a congressional oversight panel has opened an investigation into what federal officials knew about $3.6 billion in bonuses paid to Merrill Lynch employees after the government spent billions of dollars in bailout funds to help save the company from failure by arranging its sale to Bank of America.
Rep. Dennis J. Kucinich (D-Ohio), chairman of the domestic policy subcommittee of the House Oversight and Government Reform panel, said he was concerned about the payments because they were 22 times larger than bonuses to insurance giant American International Group, which created a political firestorm.
The government awarded Bank of America $10 billion to help it complete the acquisition and provided the bank a federal guarantee to limit its potential losses on about $118 billion of assets largely inherited from Merrill Lynch as part of the sale.
Kucinich questioned whether government officials knew about the bonuses while they were overseeing the sale of Merrill Lynch. He sent letters yesterday to Bank of America, the Treasury Department and the Federal Reserve requesting all documents and communication related to the bonuses.
“This raises important questions about what you knew about the Merrill bonuses, and what you did with your knowledge,” Kucinich wrote to Fed Chairman Ben S. Bernanke. “If ordinary [Bank of America] shareholders were ignorant of the details of the Merrill bonus arrangement, was the U.S. government as well?”
Kucinich noted that the bonuses were determined on Dec. 8, unusually early for the company and before a fourth-quarter loss of $15 billion was announced.
The congressional probe follows similar inquiries by New York Attorney General Andrew M. Cuomo and Neil M. Barofsky, the special inspector general for the financial system’s bailout, into the Merrill Lynch bonuses. In response to a request from Cuomo, a New York state judge two weeks ago ordered Bank of America to disclose information about the bonuses.
Scott Silvestri, a spokesman for Bank of America, and Michelle A. Smith, a spokeswoman for the Fed, declined to comment on Kucinich’s letters. A Treasury spokesman did not respond to a request for comment.