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John Thain's $1,400 wastebasket

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For a week, John Thain's face was plastered all over the nightly news. The Merrill Lynch chief executive officer was held up as a symbol of post-TARP Wall Street evil and excess, practically a thief of the people's money.

He'd renovated his office, the story went, paying an extravagant $1.2 million to redecorate lobby and conference areas, a refurbishment that included a now famous $1,400 wastebasket. And Thain blew $4 billion on bonuses for Merrill employees, despite posting fourth-quarter losses so large that Bank of America, which had by then acquired Merrill, was forced to take another $20 billion in federal bailout funds to prevent, well, something bad from happening to the bank.

For all this, Thain was strung up by the media. They ran pictures of the wastebasket and the $87,000 area rug. Bank of America CEO Ken Lewis helped revive his own flagging public image by making a media event out of his trip north to fire Thain for his audacious tastes and for the bonus debacle. New York Attorney General Andrew Cuomo, who of late has also been looking to burnish his political credentials, got into the act by issuing subpoenas seeking testimony from Thain in the bonus brouhaha.

It was a neat, nifty story line, and for once right-wing and left-wing media seemed to be in agreement. Thain was an evil guy, a wasteful hijacker of the people's money.

But there were a few problems with the popular media narrative about Thain.

Thain redecorated his office in the beginning of 2008, when the market was still above 12,000, the Troubled Asset Relief Program had yet to come into being and the fourth-quarter losses had not yet occurred. As Thain pointed out, a similar renovation to lobby and conference areas was completed on three floors of the Bank of America building in 2005, the cost of which the bank refused to release.

I bring this up not to defend Thain, but to illustrate how he was used as a scapegoat, a distraction from facts that Bank of America and the federal government would rather the media and the American people not think about.

A simple timeline illustrates what got lost here. Thain pushed through and paid out billions in bonuses to Merrill employees in December. Bank of America and Merrill completed their merger on Jan. 1. On Jan. 2, Merrill, now under Bank of America's control, paid out a second round of stock-based bonuses.

Then, on Jan. 15, the federal government pumped $20 billion in TARP money into the newly merged Bank of America/Merrill. Federal bureaucrats apparently saw nothing wrong with pumping billions into the company despite the very public, large-scale bonus payout by Merrill less than a month before.

Is writing a $20 billion check to a company that weeks before doled out billions in bonus checks a wise use of taxpayers' money? Were the architects of the TARP out of control? Had TARP spending spun out of control?

In the obsession over Thain's wastebasket, the most critical questions got lost. And that, I think, was no accident.

The Democrats, who never miss an opportunity to bash George Bush, haven't said a peep about the Bush administration's last-minute, post-bonus dole out to BofA. President Obama had stuck to bashing Thain and Wall Street's excessive bonuses in general -- a safe set of talking points.

This is because the Dems are eyeing that second, unspent $350 billion in TARP funds and don't want any limits on which companies they can give it to. And they especially don't want any limits put on the trillion or more dollars they are now talking about doling out as part of TARP II later this year. Most of the companies that money goes to will have paid out bonuses just like Merrill did. Just wait.

Cuomo, meanwhile, is expanding his investigation into the Merrill bonuses. He wants to know whether shareholders were misled about the size of Merrill's fourth-quarter losses. Meanwhile, we're learning that former Treasury Secretary Henry Paulson and company may have paid 44 percent more than the bank assets they acquired with TARP money were worth.

Oddly enough though, no one so far has subpoenaed Paulson about that, either. You'd think surely they'd want to hold a congressional hearing on it. Or maybe not.

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