Posts Tagged ‘Merrill Lynch’
Judge grudgingly accepts S.E.C.’s deal with Bank of America
In strikingly unenthusiastic fashion, federal Judge Jed Rakoff signed off on the Securities and Exchange Commission’s plan to fine Bank of America $150 million after failing to tell shareholders of about $16 billion in impending losses at Merrill Lynch.
“While better than nothing, this is half-baked justice at best,” wrote Mr. Rakoff in his ruling released Monday, a week before the case was scheduled to go to trial. “The amount of the fine appears paltry.”
The judge wrote in his report that his court was “shaking its head” and that, based solely on the merits, the settlement between the SEC and BofA should be rejected as “inadequate and misguided.” Yet he elected to go along with the SEC’s proposal, citing deference to the authority of regulators and adding that federal judges should be wary of the “power to impose their own preferences…”
The judge’s ruling also seems like a final slap at the reputation of the SEC. The federal agency was prepared to accept a $33 million fine from BofA last year until Mr. Rakoff rejected that settlement.
In the end, the judge signed off on the $150 million penalty—equal to about 3% of BofA’s pretax income last year—by citing a distinguished soothsayer and baseball player. In considering the tortured nature of the BofA case, the judge quoted Yogi Berra, who is said to have said: “I wish I had an answer to that because I’m getting tired of answering that question.”
In other words, everyone’s favorite cronies at the SEC are still taking care of their country club buddies. They’re just getting better at covering their tracks.
The Thain of Wall Street: “Let ‘em eat cake”
Daylife/Reuters Pictures
Merrill Lynch paid billions of dollars of bonuses to its employees, three days before completing its life-saving sale to Bank of America, reports the Financial Times.
The money was paid as Merrill’s losses were mounting, forcing Bank of America CEO Kenneth Lewis last month to seek additional government support for the deal. Merrill’s compensation committee agreed to pay bonuses on December 29, at least one month earlier than usual, the paper said.
Bank of America said Merrill had a $21.5 billion operating loss in the fourth quarter. Despite the massive losses, Merrill set aside $15 billion for 2008 compensation, 6% lower than a year earlier. About $3 billion to $4 billion of that compensation were annual bonuses.
Wall Street banks continue to self-destruct
Wall Street is in turmoil as Merrill Lynch found shelter in a $44bn takeover by Bank of America and Lehman Brothers headed towards filing for bankruptcy.
BofA’s bold bid for Merrill came as the world’s top banks appeared close to abandoning efforts to save Lehman and set out to build a firewall against further financial chaos with a $50bn liquidity pool to support other vulnerable institutions.
Update: Lehman Bros. has filed for bankruptcy.
The Federal Reserve said it was making it easier for financial institutions to access Fed liquidity by easing terms on its borrowing facilities and accepting a much wider range of assets as collateral. The Fed meets to decide on interest rates on Tuesday. The moves capped a weekend of high drama that could lead to one of the most radical reshapings in Wall Street’s history.
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Merrill Analyst Says Buy GM at $40 and Sell It At $11
A Merrill Lynch analyst put out some groundbreaking research on GM claiming that bankruptcy was an option for the auto company. He reversed his prior buy recommendation (issued in February 2007 when the stock was at $40) and cut the stock to an “underperform” now that it is trading below $11. I’m not quite sure what caused the analyst to change his formerly bullish opinion. Perhaps it was based on one of the following reasons?
* GM’s debt is trading and has been trading at distressed levels for some time.
* GM’s credit default swaps are already pricing in a 75% probability that the automaker will default on its debt within the next 5 years.
* Car sales have been in a steep decline and the auto industry just reported a roughly 20% decline in sales for the month of June.
* GMAC, the financing arm still 49% owned by GM, had to completely restructure its financing because its mortgage lending arm ResCap came dangerously close to declaring bankruptcy.
* GM’s stock is down 56% year to date.
* The analyst needed to change his recommendation ASAP so he could tell everyone that he warned them of GM’s bankruptcy, thus justifying his existence.
K10 asks, “Who are the investors that use Merrill Lynch as their sole source of news?”
Good question. I’m very much an amateur investor and I learned 30 years ago that Merrill-Lynch was full of crap. 50 years ago I learned that GM was incompetent and full of crap.
What’s left to discover?
