Bonuses beyond belief

The infamous AIG bonus pool amounted to peanuts compared with another Wall Street compensation outrage about to take center stage in the great American financial bailout tragedy.

The American International Group story is seared into the public consciousness by now, how employees of the London-based division responsible for most of the insurance company's problems received $165 million in retention bonuses to stay on at the place they helped wreck.

The story of Merrill Lynch's $3.6 billion bonus bonanza belongs in an entirely different league. Many of the details have already been disclosed, but they are making headlines again this week because a judge upheld the right of New York Attorney General Andrew Cuomo to disclose the names of Merrill executives who shared in the payout just before the crumbling brokerage was sold to Bank of America Corp. late last year.

Start with the money. Besides the mind-bending size of the entire bonus pool, a staggering amount of money was distributed at the top. The four executives who got the most received a total of $121 million, according to Cuomo. The next four got $62 million, and the following six were awarded $66 million. A grand total of 696 Merrill employees received at least $1 million each in bonuses.

But the Merrill story isn't just about the size of the money pot. How and when the bonus payout took place matter, too.

Merrill accelerated its normal bonus schedule so the awards took place just days before Bank of America acquired the company at the end of 2008. A couple of weeks later, executives suddenly discovered Merrill was bleeding to the tune of $13.8 billion during the final quarter of the year.

So a company that was losing money at a pace of more than $6 million each hour over a period of three months decided to reward its executives with $3.6 billion of bonuses at the very time. That would have been a sad but private story if it ended there, but it didn't.

Once Merrill's fourth-quarter financial disaster became apparent, Bank of America and the US Treasury were talking again about what it would take to prop up a crumbling balance sheet. After all, the federal government had been encouraging the bank to buy Merrill as a way to solve another serious financial mess.

The solution was $20 billion. That's $20 billion of your money deployed to patch together a business whose executives had just been awarded $3.6 billion for their stewardship and achievements in 2008.

Our connections to the bonus pools at Merrill Lynch and AIG are not the same. As taxpayers, we are majority owners of AIG, thanks to our $180 billion "investment" in the company. Retention bonuses were awarded on the government's watch. The link between taxpayer money and Merrill bonuses is more complicated, but it's real and outrageous.

Now Cuomo will be in a position to disclose exactly who got what in the Merrill bonus pool, though the thought of naming every single employee awarded a bonus sounds more like a witch hunt than a victory for taxpayers. Cuomo says he wants to lift a "shroud of secrecy."

I want someone to look at the details of the big awards to decide if it's right and possible to get some of the money back. Bank of America won't do it. It's doubtful Cuomo could prevail in cases like these, but the legal actions are the best public use of information about the Merrill money.

AIG and Merrill are the two most egregious bonus cases, but they are about past payments. Compensation limits in force right now at financial institutions that have received government support are also at issue. Some executives chafe at the restrictions and complain their best talent will go elsewhere. They say they can't wait to give back the money and pay people as they please.

Well, I can't wait to get the money back. In the meantime, some talent might leave under current pay limits but most would not. The financial world is shrinking before our eyes, eliminating many thousands of jobs at every level. This is not the 1990s, or even 2007, for that matter. Remaining employed sounds like a good deal to most people, even those with fancy titles.

Crazy compensation is one of the central reasons the financial industry and the nation are in so much trouble. Taxpayers don't need to apologize for enforcing more discipline. It would have come in handy when Merrill Lynch was writing bonus checks.

Steven Syre is a Globe columnist. He can be reached at syre@globe.com.