May 6, 2008 – 12:11 pm

Well, he is still at it. The torrent of BS from John Thain’s mouth is continuous, interspersed with just enough truth to render the deception immaculate. First Mr. Thain told a Singapore newspaper he does not see the need for Merrill Lynch to raise capital:

John Thain told the Business Times he does not foresee the need to raise more capital, after the biggest U.S. brokerage raised billions of dollars, including from Singapore investment firm Temasek, after suffering massive subprime-related losses.

However Temasek was temporarily in the red, and seeing red:

Temasek TEM.UL has invested $5 billion in the U.S. investment bank, paying $48 a share late last year. Merrill stock dropped to a 5-year low of $37.25 in March but closed on Monday at $51.75.

Rather than face angry investors and writing down damaged investments, Thain defaults to the strategy of swapping the damaged goods for level 3 ones. Sweet!

And now it seems the smooth talking Thain has some questions from the government to answer:

Merrill Lynch & Co has received requests from governmental agencies for information regarding auction-rate securities, including the recent failure of auctions, and is cooperating with the requests, the company said on Tuesday.

As is well document on this blog, Thain’s actions and motives are dubious, and this is a high-stakes game of musical chairs in which many (all?) banks are effectively insolvent and the music could stop at any instant.

Yet Merrill with its level 3 shenanigans up has its stock price up, but nosy governmental types asking pesky questions about bond auction rates. What an excellent time for a Bear Stearns-style stock crash? Keep your eyes on the options activity, especially the deep out of the money puts.

  1. 2 Responses to “To Merrill Level 3 Beats Cash”

  2. Taxpayers will foot the bill.
    He is counting on politicians to bail them out if everything implodes. “Too big to fail.” and no more Bear Stearns syndrome in Washington. Corportate socialism.

    By Marc Authier on May 12, 2008

  3. There’s another name for “corporate socialism”.

    It’s called “fascism”.

    It can’t happen here, right? Too late, it’s already well under way.

    By David on May 14, 2008

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