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Norb Vonnegut
Norb Vonnegut
"If anybody can turn international finance and hedge funds into a riveting thriller, it's Norb Vonnegut." (Jeffery Deaver) When the money talks…I listen. And I write about what happens behind the scenes in the bare-knuckled world of finance. THE TRUST, THE GODS OF GREENWICH, TOP PRODUCER.


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Posted in Business / Finance / Investing

What if Merrill Failed?

Oct. 14, 2009 11:17 am

There's plenty of Monday morning quarterbacking over Bank of America's deal with Merrill Lynch. News articles overflow with vitriolic charges from executives barking, snarling, and lifting their legs in each other's direction.

Yesterday, the New York Times reported that some outside directors urged caution during a feverish September weekend in 2008:

On that frenzied weekend, as Lehman Brothers came crashing to the ground, Mr. Gifford urged Mr. Lewis to wait a day or two to see if he could pick up Merrill for a lower price to obtain better value for Bank of America shareholders, this person said. Mr. Lewis argued that he could lose a golden opportunity to make the investment bank the crown jewel of his empire if he held off, and he agreed to pay about $50 billion in stock for Merrill. Merrill’s hefty price tag quickly became sore point for shareholders. When Mr. Lewis and other executives considered backing out of the deal, they turned to federal regulators about a second bailout for the merged company.
New York Times

I believe Mr. Lewis blew it. Had he listened to other directors, he could have crafted a far better deal for his shareholders. They suffered—massive dividend cuts and crushed share price. As the CEO, Mr. Lewis could have stopped the train wreck.

That said, I'm glad Bank of America—with whatever prodding from Uncle Sam—saved Merrill Lynch from collapse. We all saw how the capital markets reacted to Lehman's demise. Fortunately, Merrill's potential collapse will remain the stuff of fiction.

Like me.

Grove O'Rourke

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