Boston

How Corporate Greed, Finance & Political Corruption Are Undermining America (2003)

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• published: 07 Sep 2014
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Merrill Lynch Wealth Management is the wealth management division of Bank of America. It is headquartered in New York City, and occupies the entire 34 stories of the Four World Financial Center building in Manhattan. With over 15,000 financial advisors and $2.2 trillion in client assets, it is the world's largest brokerage. It has its origins in Merrill Lynch & Co., Inc., which prior to 2009 was publicly owned and traded on the New York Stock Exchange under the ticker symbol MER. Merrill Lynch & Co. agreed to be acquired by Bank of America on September 14, 2008, at the height of the 2008 Financial Crisis. The acquisition was completed in January 2009 and Merrill Lynch & Co., Inc. was merged into Bank of America Corporation in October 2013, although certain Bank of America subsidiaries continue to carry the Merrill Lynch name, including the broker-dealer Merrill Lynch, Pierce, Fenner & Smith. In November 2007, Merrill Lynch announced it would write-down $8.4 billion in losses associated with the national housing crisis and remove E. Stanley O'Neal as its chief executive.[24] O'Neal had earlier approached Wachovia bank for a merger, without prior Board approval, but the talks ended after O'Neal's dismissal.[24] Merrill Lynch named John Thain as its new CEO that month.[24] In his first days at work in December 2007, Thain made changes in Merrill Lynch's top management, announcing that he would bring in former NYSE colleagues such as Nelson Chai as CFO and Margaret D. Tutwiler as head of communications.[25][26] Late that month, the firm announced it would sell its commercial finance business to General Electric and sell off major shares of its stock to Temasek Holdings, a Singapore government investment group, in an effort to raise capital.[27] The deal raised over $6 billion.[27] In July 2008, Thain announced $4.9 billion fourth quarter losses for the company from defaults and bad investments in the ongoing mortgage crisis.[28] In one year between July 2007 and July 2008, Merrill Lynch lost $19.2 billion, or $52 million daily.[28] The company's stock price had also declined significantly during that time.[28] Two weeks later, the company announced the sale of select hedge funds and securities in an effort to reduce their exposure to mortgage related investments.[29] Temasek Holdings agreed to purchase the funds and increase its investment in the company by $3.4 billion.[30] Andrew Cuomo, New York Attorney General, threatened to sue Merrill Lynch in August 2008 over its misrepresentation of the risk on mortgage-backed securities.[31] A week earlier, Merrill Lynch had offered to buy back $12 billion in auction-rate debt and said it was surprised by the lawsuit.[31] Three days later, the company froze hiring and revealed that it had charged almost $30 billion in losses to their subsidiary in the United Kingdom, exempting them from taxes in that country.[32] On August 22, 2008, CEO John Thain announced an agreement with the Massachusetts Secretary of State to buy back all auction-rate securities from customers with less than $100 million in deposit with the firm, beginning in October 2008 and expanding in January 2009.[33] On September 5, 2008 Goldman Sachs downgraded Merrill Lynch's stock to "conviction sell" and warned of further losses at the company.[34] Bloomberg reported in September 2008 that Merrill Lynch had lost $51.8 billion on mortgage-backed securities as part of the subprime mortgage crisis.[34] Merrill Lynch, like many other banks, became heavily involved in the mortgage-based collateralized debt obligation (CDO) market in the early 2000s. According to an article in Credit magazine, Merrill's rise to be the leader of the CDO market began in 2003 when Christopher Ricciardi brought his CDO team from Credit Suisse First Boston to Merrill.[35] In 2005 Merrill took out advertisements in the back of Derivatives Week magazine, touting the fact that its Global Markets and Investing Group was the "#1 global underwriter of CDOs in 2004".[36] To provide a ready supply of mortgages for the CDOs, Merrill purchased First Franklin Financial Corp., one of the largest subprime lenders in the country, in December 2006.[37] BusinessWeek would later describe how between 2006 and 2007, Merrill was "lead underwriter" on 136 CDOs worth $93 billion. By the end of 2007, the value of these CDOs was collapsing, but Merrill had held onto portions of them, creating billions of dollars in losses for the company.[38] In mid-2008, Merrill sold a group of CDOs that had once been valued at $30.6 billion to Lone Star Funds for $1.7 billion in cash and a $5.1 billion loan. http://en.wikipedia.org/wiki/Merrill_Lynch Image By Minesweeper at en.wikipedia [GFDL (http://www.gnu.org/copyleft/fdl.html) or CC-BY-SA-3.0 (http://creativecommons.org/licenses/by-sa/3.0/)], from Wikimedia Commons