What may be the dumbest corporate merger of all time—the $165 billion deal that saw AOL gobble up Time Warner a decade ago—ended just before the holidays, when AOL formally spun off into a totally separate company.

That AOL-Time Warner merger had been a disaster for years. Indeed, the merger had essentially become a joke, a move so wrongheaded that outside observers could only laugh at the folly behind it.

The yuks first broke out when execs at the newly merged media giant forced staff on the Time Warner side to use AOL’s email. That email, designed for consumers, bombed in the workplace. Large attachments crashed the system. Messages vanished. Amazingly, that fun went on for a year.

But the merger would be no joking matter for the thousands of workers who lost their jobs, as execs of the new AOL-Time Warner rushed after the “synergy” they claimed their merger would surely create.

Meanwhile, the executives who cut the merger deal laughed all the way to the bank. Time Warner’s numero uno cashed out $153 million in stock option profits in the merger’s first year. AOL’s top gun collected $100 million in the second.

Those windfalls came as no surprise. Corporate execs, in our modern economy, don’t cut merger deals to create better companies. They merge simply to create bigger companies—because bigger companies mean bigger rewards for the executives who cut the deals.

Those executives whose companies get swallowed walk away with lush golden parachutes. The execs who do the swallowing get larger paychecks because they have larger companies to “manage.”

Only the foolish among these executives, of course, actually do much managing. The really clever ones just keep cutting deals. Hewlett-Packard CEO Mark Hurd, for instance, wheeled-and-dealed 31 mergers in the 46 months after he became the HP chief in 2005. Hurd collected just under $40 million in salary and new stock incentives in 2008.

The enormous wealth that mergers create—or, to be more accurate, the enormous wealth that job slashes and price hikes by newly merged companies generate from workers and consumers—doesn’t all funnel into corporate executive suites. Mergers leave investment bankers equally flush.

Wall Streeters who specialize in “mergers and acquisitions”—the M&A crowd—take a percentage cut of every merger deal. Over one recent six-year period, Goldman Sachs alone collected $2.7 billion in merger fees.

Last year’s financial meltdown did put a crimp on M&A fees. But business is booming again. The most recent “good” news for the merger boys: a $30 billion deal, announced last month, that will give cable giant Comcast a majority stake in NBC Universal.

All these billions of dollars in merger wheeling and dealing will cost workers and consumers billions more. Jobs will disappear as newly merged companies ax newly “redundant” workers. Prices will climb as newly merged firms exploit their more dominant market share and flex their marketplace muscles.

The financial-sector reform legislation now moving through Congress offers consumers some much-needed protection from the credit card and mortgage games today’s financial giants so enjoy playing. But the legislation does nothing to limit the mighty rewards that merger games can bring.

We need more reforming. Until we have it, those games will continue.

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Sam Pizzigati

Sam Pizzigati, an Institute for Policy Studies associate fellow, edits Too Much, an online weekly newsletter on excess and inequality.

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