The international press has been abuzz with reports of spectacular bonuses awarded on Wall Street, notwithstanding equally spectacular losses at financial services firms and a shaky economic climate. 

The New York Times reported on the numbers and included a nice quote from law professor Lucian Bebchuk, who pointed out, "This was neither the sixth-best year in terms of aggregate profits, nor was it the sixth-most-difficult year in terms of retaining employees."

Merrill Lynch has come under particular scrutiny, with bonuses of perhaps $5 billion paid despite losses so significant that, soon after acquiring Merrill Lynch, Bank of America now seeks additional assistance from the US government.

President Obama is reportedly indignant, as he should be: in the shadow of Lehman Brothers and in the face of staggering losses throughout the industry, the bonuses seem piratical.

I'm indignant too, but uncomfortable making arguments on moral grounds alone or that point towards deciding executive compensation politically.

I cast no stones, but would like to have answers to a couple of questions:
  1. Government support of financial services firms, culminating in last year's bailout, attracted plenty of attention and drew on massive brainpower. Were there any calls to cap bonuses, and if so did they find their way into law or regulations?
  2. Was behavior at Merrill Lynch really a surprise to Bank of America, and if not couldn't it have been anticipated before the acquisition?