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The Thundering Herd Laid Low: A Merrill Lynch Timeline
Key moments in the Merrill Lynch saga over the last year:
December 1, 2007 - John Thain begins his tenure as Merrill Lynch CEO, replacing Stanley O'Neal who had resigned after the company announced billion-dollar losses stemming form its mortgage investments.
September 15, 2008 - A deal is announced for Bank of America to buy Merrill, which, for the previous four quarters, has posted losses totaling $17 billion. The deal comes amid a broader financial crisis connected to the mortgage meltdown: that same day, Lehman Brothers declares the largest bankruptcy in American history, and the following day, American International Group is essentially nationalized.
October 14, 2008 - Bank of America gets $25 billion in bailout funds.
December 5, 2008 - Merrill and Bank of America shareholders vote to approve the takeover.
December 8, 2008 - Merrill's compensation committee approves payouts to staff totaling $3-4 billion, at least a month ahead of schedule. Some at B of A complain that the accelerated schedule was an effort to ensure that B of A could not cut the payments when it took over January 1.
Days later - Bank of America learns that Merrill's fourth-quarter losses were greater than expected. B of A begins lobbying the federal government for more TARP money to ease the takeover.
December 29, 2008 - Merrill bonuses paid, in the nick of time (sub. req.).
January 1, 2009 - Bank of America officially takes control of Merrill. It will later rename its brokerage division Merrill Lynch Wealth Management.
January 16, 2009 - Treasury announces it will give Bank of America another $20 billion in TARP money, to help it absorb the larger-than-expected Merrill losses.
January 16, 2009 - Bank of America reports a fourth quarter loss of $1.79 billion, including a $15.3 billion loss (sub. req.) posted by Merrill Lynch for the same quarter.
Josh
Zachary
So Bank of America would have been (15.3-1.8) 13.5 billion in the black otherwise? Are the Merrill Lynch losses one-time losses or are they gifts that keep on giving (or, um, taking in this case)?
January 23, 2009 6:04 PM | Reply | Permalink
Can we have a little deeper history going back some decades, for those of us who grew up a long time ago and remember Merrill as (reputed to be, since we were far from Wall St. ourselves and relying on the financial press and word-of-mouth for our information) the largest of stockbrokers, the largest and most conservatively reputable stockbroker of them all, who were presumably making their money from stock-trade commissions and account management, and for whom the idea of making risky investments on their own account (which apparently came to dwarf customer accounts) was no more thinkable than, say, buying a Japanese car or voting for Eugene McCarthy or George McGovern ?
How did Merril get from there, the world I remember from reading my dad's Fortune magazines and being his caddy at the (nouveau, down-scale Southern Cal) country club in the early years of the Johnson Administration, to here ?
January 24, 2009 2:22 AM | Reply | Permalink
Well, they've always been an investment bank providing wealth and advisory services in wealth and asset management. They rose to global prominence in part by being able to place the securities they underwrote directly, so your perception that they were a stock brokerage firm is accurate, and was the general perception of what they were to main street. However in specializing in management of client assets ... well, you can see where this is going.
January 24, 2009 1:38 PM | Reply | Permalink
I don't know the particulars for Merrill or any other company. But the trouble started when these brokerage houses went public. They once were partnerships, where the people running them had their reputations as well as their own financial well being on the line. So they were conservative in running the business. But when they did their IPOs and went public, the ownership transferred to all these shareholders. Higher risk means higher return, and it became possible (and inevitable) for those running the place to enrich themselves while driving the company into the ground. To hell with the shareholders. And here we are.
-- ARG
January 26, 2009 10:04 AM | Reply | Permalink
Is it possible for anyone other than a ruthless, conniving, at least slightly shady, and well connected individual to become a CEO, COO, or president of a large corporation in America today? What has become of integrity in this laissez faire business climate? If it were not possible that another Republican disaster may occur and pervert any time of federal government control of the American enterprise system, the solution to the business excesses would be strict limitations of salaries, bonuses, and in particular the “golden parachutes”!
January 24, 2009 10:35 AM | Reply | Permalink
The CEOs of both companies should be stripped of everything they own, and thrown in jail for at least 20 years, if not for life. If I stole a car I'd get more punishment than these guys, who hvae stolen maybe as much as hundred billion dollars or more. They made thier bed, it's time for them to lie in it.
Everyone wants to pretend they were just hard working stiffs caught in an unfortunate situation, I say it doesn't matter, they should be treated the same as any common criminal becasue that's all they are.
January 25, 2009 2:48 PM | Reply | Permalink
How on earth could this happen? They usually paid out the bonuses in late January or early February, yet they did this payout when they knew they were going to report losses and they were being taken over by BofA. And nobody stopped them?
What about the regulations that governed these practices?
Oh. Yeah. I remember now. They turned everyone at the SEC into eunuchs, just for this kind of eventuality.
January 25, 2009 6:04 PM | Reply | Permalink
Marshall University is going to be pissed at the headline..
January 26, 2009 11:04 AM | Reply | Permalink