When Bank of Montreal offered US$5.8 billion to buy Wisconsin bank Marshall & Ilsley (M&I) last December, it was seen as another bold move by a Canadian bank pushing into the U.S. market. Now BMO finds itself embroiled in the standoff between Wisconsin Gov. Scott Walker and the state’s unionized workers, and the unions have set their sights squarely on BMO’s latest acquisition.
Walker’s high-profile effort to strip public sector unions of bargaining rights sparked protests and riots in Madison last month. But having failed to deter the governor from his crusade, unions are now going after his biggest financial backers. Last year, M&I’s executives gave roughly US$46,000 to Walker’s campaign. The unions have warned that if M&I does not denounce Walker’s policies, they’ll yank their funds from the bank. A grassroots “Move Your Money Campaign” is under way. Earlier this month there were reports several firefighters withdrew their savings, around $200,000, from the bank. According to The Nation magazine, unions have roughly US$1 billion tied up in M&I.
What’s got the unions particularly incensed is that M&I was a major recipient of Washington’s TARP bailout program. M&I received US$1.7 billion, which it has yet to repay. What’s more, M&I executives, including CEO Mark Furlong, stand to reap US$70 million in “golden parachute” payments after the BMO deal closes, which is expected in July. Under the terms of BMO’s takeover, the bank will pay off the bailout money, negating TARP rules that limit executive compensation. Protesters took the issue to BMO’s annual meeting in Vancouver on March 22. BMO chairman David Galloway conceded the executive payouts were “large” but that it was a contractual arrangement. Meanwhile, president and CEO Bill Downe said the payouts are “not our affair.”
At the annual meeting, Downe said BMO expects to earn US$1 billion in profits from its U.S. consumer banking business after integrating M&I. The question now is, will union workers make it an issue for BMO by pulling their funds?