Tuesday, July 7, 2009

Bank of America and Merrill Lynch -- Who's To Blame?

Last night, I watched a new episode of Frontline about Bank of America's acquisition of Merrill Lynch last September (contract-signing) and January (closing).

Both Kenneth Lewis and John Thain were interviewed extensively for the program, and Lewis in particular was almost scary in his intensity. As Frontline told it, as of September 2008 Lewis was completely bent on acquiring Merrill, whereas Thain's initial proposal was to sell only a 9.9% stake. By December, however, Lewis and the B of A board had determined the extent of Merrill's liabilities and considered reneging on the deal based on a "material adverse change."

241. Frontline was ambiguous about the extent of legitimate and/or inappropriate arm-twisting exerted by Henry Paulson when B of A started having second thoughts in December. Are there any official government investigations going on? Wasn't Lewis required to disclose the information about Merrill's liabilities to B of A shareholders under securities laws, and if so won't B of A shareholders ultimately be able to recover from the company (a loss which, ironically, will be passed along to the US taxpayers!)?

242. The program pointed out that B of A was Nationsbank until 1998, at which point it acquired the California regional bank Bank of America and started using its name. How big was California Bank of America prior to the merger? Was it, at all, a substantial national-level player? Did Nationsbank buy them primarily (solely?) for the name?

243. What is Thain doing now? Is he still respected in the banking/business communities?

244. What is Paulson doing now? Is the Obama Administration consulting with him at all? Will he go down as one of the major "blamees" in the crisis of last year?

245. Why did Bank of America (and Lewis in particular) still want Merrill Lynch so badly in September 2008? Wasn't the extent of the investment banks' problems already pretty apparent by then? What did they have wrong in their evaluation of Merrill?

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