Merrill Lynch is one of the world’s top wealth management, capital markets and advisory companies with operations in over 35 nations. It is known for its good treatment of employees in training development. However, this company was recently hit by a financial crisis that led to it being acquired by the Bank of America for $50 billion. The main reason for the acquisition decision was because the Merrill Lynch’s management did not see the possibilities of making it through the financial crisis alone. However, the company is said to have paid out $3.6 billion in bonuses slightly before the completion of the acquisition process by the Bank of America. During this time, the Federal Government was busy spending billions of dollars in a bid to bail out and save Merrill Lynch.
In my opinion, I think it was quite unfair for Merrill Lynch to be paying out the bonuses and benefit a few rich individuals while the government was using the tax payers’ money to save the company. Merrill Lynch should have used the money used to pay out the bonuses as part of the funds meant to save its operations from the financial crisis it was facing. Having lost a lot of money in 2008, the company should have put the money into much valued use other than the bonuses.
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The Wall Street firms should not pay higher salaries and fewer bonuses to the employees. This is because it would appear as a means to sabotage the efforts of the Troubled Asset Relief Program (TARP) efforts in saving large and economically influential companies from collapse amid financial crisis. Furthermore, it would also frustrate the government’s endeavors to save the significant institutions using the tax payers’ money.
I am outraged by the fact that a firm like Merrill Lynch paid out billions of dollars in bonuses yet the government was busy engaging the tax payers’ money in saving it from its own crisis. During this pay outs, the company had registered higher losses in its previous years of operation. Asking the government to save this firm after its own mismanagement of finances also shows high levels of irresponsibility in the management. Therefore, the money used in the bonuses payout should have been used in saving the company from the financial crisis.
At this moment of crises for Merrill Lynch, the paying off of the large bonuses was not justified. This is because the payment would benefit a small number of shareholders while leaving out the majority of individuals who entrusted their investment with them. Moreover, having made huge losses, the company should have put the money into better use and save the company instead of paying bonuses to a comparatively small number of individuals.
In my opinion, it was the goal-oriented pay-for-performance system of Merrill Lynch that caused the undue risk taking and the financial crisis. In this case, the company took too much risk in the market. That is, the company used billions of money for subprime loans then selling the loans as investments. Therefore, too much money was exposed to recession and other risks that resulting to the crisis. In addition, the reckless behavior and unchecked excess that caused the crisis. This is because the management was said to be motivated by quick earnings and bloated bonuses. It serves in the wealth management department of the Bank.
Today, Merrill Lynch is a division of Bank of America. It is still recognized as one of the largest brokerage firms in the globe.