Merrill Makes the Case for Nationalization

Merrill Lynch — the former Wall Street titan that was recently acquired by Bank of America — like most investment banks, typically pays about 50 percent of its revenue in compensation. The chart (after the jump) depicts Merrill’s revenue and compensation data since 2000 — and it demonstrates that the Wall Street giant dramatically broke from that pattern in the last two years. After record revenues and compensation in 2006, revenues tumbled by 67 percent in 2007. But compensation dropped by only six percent. Revenue was actually negative in 2008 (which is hard to do), but compensation dropped by another six percent. Why the change?

A gold star for anyone who guesses that $25 billion in Federal TARP payments might have had something to do with it.

It’s worth noting, too, that Merrill’s total profits over the entire nine-year period were a negative $7 billion. Those big pre-2007 profits were fake, but the compensation was real. How can we trust these guys with taxpayer money?