Amidst all the tribulations about the US government's bailout of Bank of America, an interesting fact is emerging: Merrill may have been insolvent at the time of the takeover. The Wall Street Journal says Merrill's losses for the fourth quarter could be as high as $10bn and the Financial Times says that if it transpires that ML was technically insolvent when the BofA deal closed on January 1st, any bonus payments could come under 'close scrutiny.' When Lehman Brothers went bankrupt in September, pundits suggested that 2007 bonuses would have to be returned. That never happened, but the same (surely?) applies in the case of Merrill. BofA could definitely do with the cash.
BAC CEO Ken Lewis decided to buy Merrill Lynch. No one forced him to do it. If it was such a bad decision that it threatened to kill the firm, he should resign in disgrace. (Clusterstock)
BofA's stock fell more than 20% on Thursday morning and has almost halved in value so far this year. (Telegraph)
Under the terms of the deal BoA will receive $20bn in exchange for preferred stock.
BoA will absorb the first $10bn loss on a pool of $118bn of toxic assets and the Treasury and FDIC the next $10bn. (Financial Times)
BofA executives are livid about the true depths of the problems at Merrill, which they feel were glossed over last fall in Merrill's rush to find a saviour. (Financial Times)
BofA might be able to make a claim of "fraudulent conveyance" against the New York brokerage house. (Financial Times)
The upheaval doesn't seem to have marked the trough. It now looks as though it was merely a signpost to steeper descent. (Telegraph)
Obama aid calls for prop trading ban. (Financial News)
Team spirit and solidarity at SocGen. (Financial Times)
JPMorgan's investment bank would have broken even were it not for Bear Stearns. (Financial Times)
Anglo Irish "remains solvent." (Telegraph)
Government advises Singaporeans to take short showers, eat frozen meat to save cash. (Bloomberg)
Church of England is hiring a fund manager. (Financial News)
Not Robert Peston. (BBC)