January 18, 2009 – 2:34 pm

On the same frantic weekend as Lehman Brothers lost everything, Bank of America conspired with the Treasury to embezzle $50B from American taxpayers.
It was on that weekend that John Thain wiggled his way into Bank of America’s bosom.  The prevailing thought of the day was that Thain executed a masterpiece of negotiations, but it appears now, like anything else on Wall Street, that it may be his Goldman Sachs pedigree and insider connections which served him best.

Knowing that investors were worried about Merrill, John A. Thain, its chief executive and an alumnus of Goldman Sachs and the New York Stock Exchange, and Kenneth D. Lewis, Bank of America’s chief executive, began negotiations. One person briefed on the negotiations said Bank of America had approached Merrill earlier in the summer but Mr. Thain had rebuffed the offer. Now, prompted by the reality that a Lehman bankruptcy would ripple through Wall Street and further cripple Merrill Lynch, the two parties proceeded with discussions.

Who could have known at the time that those discussions included provisions to disguise the theft from the Treasury to Merrill Lynch as a merger or buyout of Merrill Lynch into Bank of America? Who could not know it now? Bank of America bought Merrill Lynch for $50B in September, but the deal was not finalized until January 1, 2009 by which time Merrill’s meltdown had significantly heated up. Any CEO worth his salt would have dumped the deal, but Lewis clung to it.
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.
“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.”
Oh, he did it for the country. Silly me. Who’d have thought he was so patriotic! So let’s see if we get can this straight: Lewis did it for the country, but then made the country pay for it.
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 (January 16, 2009) 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.
So, Bank of America defrauded the taxpayer for another $20B, moved up its reporting date, then promptly reported  its first loss since 1991,  which conveniently did not include the dead weight of $15B  of unexpected Merrill Lynch losses.

Bank of America Corp. swung to a fourth-quarter loss on Friday after accepting $20 billion in aid from the U.S. government to help it absorb troubled Merrill Lynch & Co.’s piles of souring loan-backed securities.The Charlotte, N.C., banking giant, which disclosed its results two business days earlier than expected, posted a net loss of $1.79 billion, or 48 cents a share, but still managed to turn in a profit of $4 billion for all of 2008. Widening losses of more than $15 billion at the bank’s latest purchase, Merrill Lynch, however, overshadowed the bank’s full-year profit.

In the quarter, Bank of America did the things that losing banks do:  it accepted fresh capital, marked down $5.5B in bad loans, cut its dividend and increased its loan-loss reserves.

The U.S. had already injected $15 billion into Bank of America and $10 billion into Merrill to bolster the combined company against the credit crunch.

Bank of America charged off $5.54 billion of loans as uncollectible, equal to 2.36 percent of total average loan and leases, compared with 0.91 percent a year earlier, the statement said. The provision for loan losses increased to $8.5 billion from $6.45 billion in the third quarter because of “economic stress on consumers,” the bank said.

But even as Bank of America writhes in pain, BoA CEO Ken Lewis seems more concerned with Merrill Lynch. Why might that be?

About three-quarters of the federal aid is intended to cushion Merrill’s losses, with the rest for Bank of America, Chief Financial Officer Joe Price told investors during today’s conference call.

It’s the thing that naturally happens when a government suffering from a horrible banker infestation looks for the rodents rather than the people. In this case Merrill Lynch’s precious insiders were in real danger of actually having to fork over a dime, but now thanks to the bailout disguised as a merger with Bank of America, it’s only the working class forking over a third of its income. Thank goodness we still have Wall Street!

“The additional funds provided to B. of A. is the only reason why the dollar is rallying against the Japanese yen, and why we are seeing a recovery in all of the higher-yielding pairs such as the euro/dollar and pound/dollar,” said Kathy Lien, director of currency research at GFT.

As Bank of America acts as a cash conduit to Merrill Lynch, investors head for the exits and you and me get to pick up the tab.


  1. 2 Trackback(s)

  2. Jan 19, 2009: Bank of America Fleeces Taxpayers « The Salty Pundit
  3. Mar 1, 2009: Bank-Implode! » Blog Archive » Wells Fargo Drops $2.5 Billion in Q4

Post a Comment