January 16, 2009 – 1:25 pm

Wall Street is a criminal enterprise based on a confidence scam, so it should come as no surprise that the swindle continues unabated. Bank of America and Citigroup, two of the biggest swindlers on the Street reported repugnant fourth-quarter results, but had a lot of clean up help from the New York Times. Witness:

Hours after receiving another government lifeline, Bank of America announced gaping fourth-quarter losses on Friday. The bank lost $1.79 billion in the fourth quarter, down from a gain of net income of $268 million a year ago, in a reversal caused largely by growing consumer loan losses.

And bigger troubles came from Merrill Lynch, which Bank of America hastily snapped up in September for $50 billion. A fresh round of write-downs at Merrill pushed that firm into a $15.3 billion loss for the fourth quarter. That was the firm’s sixth troubled quarter since the credit crisis began. Merrill was among the most aggressive — and most harmed — by mortgage investments.

That’s because Merrill was piloted by a kamikaze CEO.

Merrill’s results for the fourth quarter are not a part of Bank of America’s. The merger of the two banks closed on Jan. 1.

In a conference call Friday morning, analysts asked Kenneth D. Lewis, the bank’s chairman, whether he had regrets that he had agreed to purchase Merrill.

He should have been asked if he had any choice in the deal.

Mr. Lewis said that as Merrill’s fourth-quarter losses mounted, he did re-evaluate whether he should close the deal and whether he could renegotiate the price for Merrill. But, he said, regulators implored him to complete the transaction and said they would provide support.

Above question answered.

“The government was firmly of the view that terminating or delaying the closing of the transaction could lead to significant concerns and could result in significant systemic concerns,” Mr. Lewis said. “We did think we were doing the right thing for the country.”

Translation: he did the right thing for Merrill’s well-connected insiders. Emperor Paulson’s force-feeding of Merrill Lynch to Bank of America was to disguise the bailout as a merger, but the Emperor is naked. We all saw through that one!

Still Mr. Lewis expressed optimism about the conglomerate he has built, once the economy recovers.

Does he mean in our lifetimes?

“This company will generate huge amounts of profit when we get a normal economic environment, not even a great one but a normal one, and so it’s almost directly related to how fast you think the economy will come back,” he said.

Blame it on the economy then. It’s the same Ponzi economy that Bank of America and its now not-so-tasty wholly-owned subsidiaries took such a big part in wrecking.

Bank of America’s shares, which have fallen sharply over the last week, were down sharply again in early-afternoon trading on Friday, shedding $1.17, or 14 percent, to $7.15.

Bank of America’s shares once traded above $50.

In the conference call, Bank of America executives also discussed the government assistance that was announced overnight to help them complete the merger with Merrill.

Two weeks after closing its purchase of Merrill Lynch at the urging of federal regulators, the government cemented a deal at midnight Thursday to supply Bank of America with a fresh $20 billion capital injection and absorb as much as $98.2 billion in losses on toxic assets, according to people involved in the transaction.

Blame it on those federal regulators; it’s their fault that the serfs will be forking up over $100B more of the fruits of their labors to save Merrill Lynch’s insiders.

The bank had been pressing the government for help after it was surprised to learn that Merrill would be taking a fourth-quarter write-down of $15 billion to $20 billion, according to two people who have been briefed on the situation, in addition to Bank of America’s rising consumer loan losses.

Oh, I get it now. The bank was surprised to learn that Merrill Lynch would be taking a fourth-quarter write-down of $15-$20B. Oh my!

The second lifeline brings the government’s total stake in Bank of America to $45 billion and makes it the bank’s largest shareholder, with a stake of about 6 percent.

That just about nationalizes Bank of America!

The program is modeled after a larger one engineered to stabilize Citigroup as its stock price plummeted in late November, but it appears to have had limited success. Under the terms, Bank of America will be responsible for the first $10 billion in losses on a pool of $118 billion in illiquid assets, including residential and commercial real estate and corporate loans, and that will remain on its balance sheet.

This is not to be the last carbon copy of the Citigroup bailout.

The Treasury Department and the Federal Deposit Insurance Corporation will take on the next $10 billion in losses. The Fed will absorb 90 percent of any additional losses, with Bank of America responsible for the rest.

In exchange for the new support, Bank of America will give the government an additional $4 billion stake in preferred stock. It has also agreed to cut its quarterly dividend to a penny, from 32 cents, and accept more stringent restrictions on executive pay.

The F.D.I.C. announced separately that it would soon propose to extend its guarantee on supporting new consumer lending to 10 years, from 3 years.

The FDIC is attempting to put the “confidence” backing to the confidence scam.

“The U.S. government will continue to use all of our resources to preserve the strength of our banking institutions and promote the process of repair and recovery and to manage risks,” regulators said.

Translation: the government will bail out its banker friends even if it breaks the backs of every worker in the country.

With losses mounting in the financial industry, other banks may eventually feel compelled to turn to the government for assistance, and the program could to used for other big banks. Taxpayers could end up guaranteeing hundreds of billions of dollars of banks’ toxic assets.

Taxpayers have already guaranteed hundreds of billions of dollars of banks’ toxic assets.

“The financial services sector still needs more equity,” said Frederick Cannon, the managing director at Keefe, Bruyette & Woods. “TARP was announced in mid-September and most of the initial decisions were based on the state of the economy then. The economy has gotten a heck of a lot worse.”

Then why should we give the financial services sector any more equity?

Government officials said that they did not have new money to allocate for this assistance, so they used funds that were already allocated from the $350 billion bailout fund for other banks or for future stabilization programs. The officials said that even though Citigroup’s stock had tumbled since November, that bank’s stock price might not be the best indicator of whether the program was working.

Translation: government officials are allocating money to their billionaire banker buddies and people who actually go to work for a living will have to pay for it.

Bank of America’s troubles are only adding to the worries. Mr. Lewis had earned a reputation for taking big bets that helped transform NationsBank, a small lender, into a consumer powerhouse with bicoastal branches — and was often accused of overpaying. It snapped up Bank of America and took on its name, then followed with flashy deals for FleetBoston Financial in 2003 and then the credit card giant MBNA in 2006. That was followed by US Trust and LaSalle Bank of Chicago a year later.

Last year, Mr. Lewis’s bank also bought Countrywide Financial Corporation, the troubled mortgage giant that has come to symbolize many of the excesses of the subprime mortgage era. That made Bank of America the biggest player in every major financial service but wealth advice.

Even before the most recent deal with Merrill closed, troubles began to surface. At the time, shareholders liked the strategic fit of adding Merrill Lynch, the nation’s biggest brokerage firm, to the nation’s biggest bank. Still, they worried that Mr. Lewis had paid a hefty premium — or underestimated Merrill’s losses — in the merger stitched together over the mid-September weekend that Lehman Brothers filed for bankruptcy.

When the deal was announced, Mr. Lewis said that he had considered buying Merrill months earlier but was not comfortable with its mortgage exposure. John A. Thain, the chief executive of Merrill Lynch, said he had cleaned up many of his company’s problems. “We have been consistently cleaning up the balance sheet, repairing the damage that was done over the last few years,” Mr. Thain said.

Mr. Lewis praised Mr. Thain for decreasing risks at the firm and said that Merrill’s capital levels were in good shape.

Then why were they so desperate for cash?

As it turned out, more problems were lurking. In December, when executives at Merrill began tallying losses on its mortgage investments, they were found to exceed previous estimates. When Bank of America was informed of the gaping write-downs, the bank became fearful it would not have the capital to cover them. The revelations, which came just weeks before the merger was expected to close, prompted Bank of America to ask the government for additional help.

As it turned out??? You must be kidding!!!

After Bank of America told regulators in December that it might walk away from Merrill because of mounting losses at the brokerage, government officials said they decided they needed to take immediate action to avert a systemic risk.

The only thing at risk was the well-connected insider elites at Merrill.

Still, the Merrill deal has not been any easy deal for Mr. Lewis to digest. “He made a bet,” said Brad Hintz, an analyst with Sanford C. Bernstein & Company. “He bought the retail broker operation, and in a normal environment that’s a gold mine.

If Mr. Lewis was such a great CEO, then he should certainly know that this is not a normal environment.

The challenge that Bank of America has is, can they keep their hands off of the retail brokerage operation, because their history in terms of acquisitions isn’t really perfect.”

Bank of America has no challenges. It was given an offer it could not refuse and Bank of America has cemented its foothold as THE Bank of America.


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