Bank of America (NYSE:BAC) Cranking Up Bonuses for Investment Bankers

Bank of America (NYSE:BAC) and Brian Moynihan has sent a clear signal to its investment banking brokers that they’re going to take care of them going forward, as bonuses are set to reach the levels they were in 2007 for Merrill Lynch employees.

After Merrill was acquired by Bank of America, they became the primary investment arm of the company, as before the acquisition Bank of America had a very small investment banking unit.

Although a number of financial writers are sounding alarms over Moynihan publicly stating this, it’s somewhat ignorant to think Bank of America has to keep watching over their shoulder for government approval for their compensation decisions, as there won’t be a Bank of America if that’s how they decide to operate.

Moynihan will have to publicly look like he’s doing that, but operationally it would be business suicide, as the market will determine the ability to recruit and retain top people, and nothing else should stand in the way of Bank of America and other financial institutions doing that.

What Moynihan and Bank of America are doing is recruiting and communicating they will take care of their current people as well. If they don’t do that, they will have a lot of problems competing on the world market and not only growing, but retaining their market share.

With investment banking going to be the key revenue and profit driver for some time to come, banks will have to offer competitive pay and bonus packages to keep and attract key people. If they don’t, those companies will suffer enormous damage as the retail banking side of the business continues to suffer, with little prospects for growth over the next year or two.

The only thing I see that Moynihan must be careful of is in how he makes these types of announcements and how often. He obviously must be somewhat cautious, in the sense of not attracting the attention of those who oppose capitalism in the mainstream media to the degree that they fixate on him and Bank of America.

Other than that, he still needs to be aggressive and bold in drawing quality people to their investment banking division, as that’s what will generate growth over the next several years, and if they can’t compete there, they’re not going to be able to compete, and they’ll be a very under-performing company.

It’s a little game of ‘let’s pretend’ they’re all playing, but it can’t be played too close to the vest or nobody out there will understand they’re ready and willing to pay for top people in the industry.