Wednesday, June 17, 2009

The BofA-Merrill merger

Last night's installment of Frontline was designed to give Ken Lewis's point of view on the forced merger between Bank of America and Merrill Lynch. The point seemed to be that Lewis did what the government (Paulson and Bernanke) wanted him to do, even though he didn't like it, because it didn't look to him like it was in the best interest of BofA's shareholders. They even suggested (or had Maria Bartiromo suggest) that John Thain did the right thing by getting a good price for Merrill's shareholders. Lewis feels like he was punished for his good deeds--taking the TARP money and rescuing Merrill.

I find it hard to be sympathetic to either of these guys. As the story points out, toward the end of the negotiations, Thain was more concerned about lining his own and his buddies' pockets than anything else. And he was either willfully ignorant or deliberately deceptive about the depth of Merrill's problems. It seems to me that Lewis has no cause for complaint if he went into this knowing that the reason he was doing this was to save the financial system, and that he really had no idea how bad Merrill's balance sheet was. Lewis also knew that the Treasury stood ready to rescue his bank if the losses were large enough and, after all, he did have that TARP money. Nor is much said about the Treasury's efforts to find another buyer. I'm disappointed in Frontline. When are we going to get a documentary that takes a public-interest point of view?

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