Bank of America - Merrill Lynch Merger

[HopHead]

Yep... This is going to be a case of "he said, she said" for a while... Wonder what Lewis' rebuttle will be now.

[monsoon]

I say this sort of tongue in cheek, but Thain should have said...."Dear ex-MLer's. Thank me for your 2008 bonuses. Had I not paid you what I did, when I did, BofA would have certainly given you far less. As retribution for my crucifixion, I suggest that you be obstenate througout the merger process and show as little gratitude as possible that you are still employed. Peace out, I'm going skiing in the Alps, and can somone FedEx me that sweet trashcan that was in my office."

Indeed. $4 Billion worth of bonuses paid out right at the end of the year. And while this nonsense goes on, and literally $trillions being thrown at these people, there were 54,000+ layoffs announced just today by corporate America. This is in addition to the 600,000 layoffs that were announced between Jan 5 and Jan 23. These numbers don't include firms that are not required to make these kinds of announcements and other firms doing it in such a way as not to be noticed.

I have to wonder when the mobs with the burning touches start heading to these bank boardrooms and executive suites as the tolerance for these bailouts has to be wearing very thin given the patty cake going on between Lewis and Thain. While this might be considered an overstatement, the news comes today that the Iceland's government has collapsed because of the financial mess caused by the bankers there. Thain and Lewis are supposed to working on using the money they got to put Americans back to work. I would say they failed at that too. The anger that Americans are generating at the banks is going to force the politicians to dole out some very tough medicine on these banks, or they might simply let them collapse.

Update: It's up to 68,000 laid off today.

Update 2: Make that 72,000

[monsoon]

The NY State Attorney has apparently subpoenaed both Thain and BofA's CAO, J. Steel Alphin to testify on the bonuses given out at the end of the year. This is part of the probe on executive compensation at banks receiving the bailout money. It also sounds as if the SEC is getting involved on how ML and BofA handled their merger.

[Commoner]

Board meeting today. We'll see if Lewis keeps his job and, in turn, whether Sonoma can rely on his continued patronage.

[atlrvr]

If Lewis is out, then who? I hear Bob Steel is looking for a job

[rockhilljames]

Oh dear lord.

Maybe Huge McColl could take a break from selling art.

[Commoner]

Oh dear lord.

Maybe Huge McColl could take a break from selling art.

The unsubstantiated rumor of dubious origin was McColl for Chairman (through this rough patch) and a former Nations/BAC CFO for CEO.

Come to think, though, Bob Steel doesn't sound too bad. He's a finance guy (as opposed to an acquiror or commercial lender) with obvious connections to Treasury -- their most important shareholder, these days. There's a pretty good chance he will have a more intimate understanding of whatever huge new bailout package is unveiled next week than most other similarly-situated CEOs.

I don't think it's a possibility though.

[49er]

his hands are probably tired and arthritic from the marionette strings attached to kenny and the board

[rockhilljames]

I was just kidding about McColl but I do think it would be the best possible solution. He'd look around, kick a few asses and get the bank running profitably again.

[monsoon]

My guess would be that McColl wouldn't touch the mess at BofA unless he knew something was already coming down the pipeline to solve it's problems. He left the bank on a high note and as somewhat of a Charlotte celebrity because of it. Why ruin it all by jumping into the putrid sewer it has become. He might never get that stink back off.

Speaking of that, all of the bank stocks are up today, including BofA, in anticipation that Obama is going to save them with another buyout. This is the bad bank deal where the government would simply buy off all of these banks mistakes. It's said that it will cost a trillion dollars to do this. Money stolen from the future. It's an insane plan. I am assuming the people who believe this think then it will be business as usual at BofA.

Aside from that....

It has also come out today that just 3-4 days after BofA got the first bailout of $25B, they hosted a conference that tried to put a plan in place to bring down the Employee Free Choice Act supported by Obama and most democrats. It's an incredible story given the bank's position these days and example of how detached and removed these CEOs and executive management are removed from the plight of the average workers in this country that built that bank in the first place.

[Commoner]

My guess would be that McColl wouldn't touch the mess at BofA unless he knew something was already coming down the pipeline to solve it's problems. He left the bank on a high note and as somewhat of a Charlotte celebrity because of it. Why ruin it all by jumping into the putrid sewer it has become. He might never get that stink back off.

Speaking of that, all of the bank stocks are up today, including BofA, in anticipation that Obama is going to save them with another buyout. This is the bad bank deal where the government would simply buy off all of these banks mistakes. It's said that it will cost a trillion dollars to do this. Money stolen from the future. It's an insane plan. I am assuming the people who believe this think then it will be business as usual at BofA.

Aside from that....

It has also come out today that just 3-4 days after BofA got the first bailout of $25B, they hosted a conference that tried to put a plan in place to bring down the Employee Free Choice Act supported by Obama and most democrats. It's an incredible story given the bank's position these days and example of how detached and removed these CEOs and executive management are removed from the plight of the average workers in this country that built that bank in the first place.

Can you post a link? I'd be interested to read about the circumstances surrounding a labor relations conference hosted by a bank with hardly any (if any) organized employees.

EDIT: Are you referring to the conference call that BAC provided a dial-in number for, among US Chamber members? Or did they actually host a meeting somewhere? http://www.huffingtonpost.com/2009/01/27/b...n_n_161248.html

Also - another thread to discuss the merits and drawbacks of the EFCA would be interesting. I don't know if this is the place for a substantive reply to card check legislation. That probably wouldn't go over well.

[DanRNC]

Its unbelievable that BofA has the unmitigated gall to actually consider taking the naming rights for the new Yankees stadium after feeding at the government trough for billions of dollars.

Story

[krazeeboi]

I think I'm going to start looking for another bank.

[monsoon]

Not very surprising the BOD of BofA has come out in support of Lewis. Not much more to say about that.

------------------------------

On Lewis's decision to take over Merrill Lynch, which I think everyone now agrees was bad decision for the bank, I notice these comments from a speech that Vladimir Putin gave the World Economic Forum in Davos this week.

..."I just want to remind you that, just a year ago, American delegates speaking from this rostrum emphasised the US economy's fundamental stability and its cloudless prospects. Today, investment banks, the pride of Wall Street, have virtually ceased to exist. In just 12 months, they have posted losses exceeding the profits they made in the last 25 years. This example alone reflects the real situation better than any criticism. ..."

If you are interested, you can view his entire speech here. Putin has his detractors, but this is a person that does control the 1/6 of the land resources of the entire planet. The reason that I bring this up is that if this is true, then Lewis bought ML at exactly the wrong time. This would also suggest there are gong to be fundamental changes in how the finance industry works in this country. How it affects Charlotte is anyone's guess.

[nashbill]

I was listening to NPR this morning. There was as editorial suggesting that the government change its ?perfered? stock into common stock. With what BOA stock is trading at the government would have a 70% share of the stock and could force the BOD out. I am no financial expert. I was wondering is this even possible?

[Commoner]

I was listening to NPR this morning. There was as editorial suggesting that the government change its ?perfered? stock into common stock. With what BOA stock is trading at the government would have a 70% share of the stock and could force the BOD out. I am no financial expert. I was wondering is this even possible?

It depends on the terms of the investment. I don't believe that vanilla TARP Capital Purchase Program terms provide for a conversion from preferred to common stock.

Participants do, however, grant Treasury a warrant to purchase newly-issued common stock having an aggregate market value price at or below 15% of the amount Treasury previously invested in preferred shares. The 15% ceiling is subject to rolling reductions every six months that Treasury does not exercise the warrants. If Treasury exercises these warrants, they still have to pay for the shares, based on a trailing average market price for common shares.

Your arithmetic may very well be correct, but I don't think that arrangement is built into the program. I'd be curious to hear from someone who thinks otherwise.

[monsoon]

Bank of America stock broke the $5 barrier today and is headed downwards. This time it and Wells seem to be the only big banks to be headed downward. However if BofA keeps going down, I wonder when it becomes a take over target. The entire corporation is now worth considerably less than the amount of bailout money handed to it. Meanwhile the bank's reputation continues to get hammered and now Ken Lewis, along with some other executives, is being summoned to Congress by Barney Frank over the issue of TARP (bailout) and accountability.

[Commoner]

Bank of America stock broke the $5 barrier today and is headed downwards. This time it and Wells seem to be the only big banks to be headed downward. However if BofA keeps going down, I wonder when it becomes a take over target. The entire corporation is now worth considerably less than the amount of bailout money handed to it. Meanwhile the bank's reputation continues to get hammered and now Ken Lewis, along with some other executives, is being summoned to Congress by Barney Frank over the issue of TARP (bailout) and accountability.

I don't think BAC becomes a takeover target. Who would acquire? Nobody. A TARP participant couldn't afford them and there would be endless regulatory approval issues. What financial holding company isn't a TARP participant? A non-FHC can't acquire them.

The only foreseeable acquiror is their defacto owner -- Treasury and, somehow by extension now, Congress. There's nothing in the existing relationship that establishes a method of outright nationalization (other than an FDIC/OCC declaration of insolvency, which is not linked to its price per common share).

The market capitalization of the company might be lower than the price of preferred shares issued to Treasury, but BAC is obviously worth more than just that amount. These stock prices, arguably, reflect the possibility of nationalization (I say "possibility" because the price reflecting the fact of nationalization would be $0) -- a huge discount from the enterprise's book value.

[monsoon]

/// A TARP participant couldn't afford them and there would be endless regulatory approval issues. What financial holding company isn't a TARP participant? A non-FHC can't acquire them.

....

At this point, I'm of the opinion that if Osama Bin Laden showed up with the necessary cash and promised to fix this bank, that Congress would fight over who would get to propose the bill to change whatever regulations would be in the way.

The management of these big banks has been incredibly stupid with more stories coming out this week of BofA holding lavish 5 day parties at the Super Bowl, Wells wanting a big expensive Las Vegas bashfest that it was defending on TV just yesterday, and Citi paying $400M to put its name on a baseball stadium. They are getting ready to get some really tough medicine tossed at them.

[HopHead]

Here's some more info on BofA. Apparently they are now selling three of their private jets, helicopter (from ML) and one the NYC apartments they keep for execs. An article on CNBC said that it costs as much as $10k/per hour to operate one of these jets from Charlotte to NYC. Now last time I checked, flights on USAirways from CLT to LGA are pretty darn cheap. As matter of fact, I was just there last week and my ticket was under $200. You include parking at CLT and the cab ride to Manhattan from LGA, that's easily under $300.

Now, just imagine how much money they would save by NOT moving so many jobs up to NYC and keeping them in Charlotte.

[Commoner]

Here's some more info on BofA. Apparently they are now selling three of their private jets, helicopter (from ML) and one the NYC apartments they keep for execs. An article on CNBC said that it costs as much as $10k/per hour to operate one of these jets from Charlotte to NYC. Now last time I checked, flights on USAirways from CLT to LGA are pretty darn cheap. As matter of fact, I was just there last week and my ticket was under $200. You include parking at CLT and the cab ride to Manhattan from LGA, that's easily under $300.

Now, just imagine how much money they would save by NOT moving so many jobs up to NYC and keeping them in Charlotte.

This is probably the lone voice on this site defending private aviation, but you just can't have C-level people waiting in security lines, waiting in a terminal, and sitting on a runway for 2 and a half hours, without the means to perform C-level functions. This isn't a defense of Sandy Weil (former Citigroup CEO) using a C aircraft to take his family to the islands during Christmas. But at some point, though it's incredibly expensive, it's not practical to have indispensible people flying commercial. It's not an entitlement issue or a status issue. What's the hourly cost of compensating a CEO (not considering the $500,000 cap, which is a whole other issue)? It's probably not far from $10,000 per hour.

[UrbanFuture]

This is probably the lone voice on this site defending private aviation, but you just can't have C-level people waiting in security lines, waiting in a terminal, and sitting on a runway for 2 and a half hours, without the means to perform C-level functions. This isn't a defense of Sandy Weil (former Citigroup CEO) using a C aircraft to take his family to the islands during Christmas. But at some point, though it's incredibly expensive, it's not practical to have indispensible people flying commercial. It's not an entitlement issue or a status issue. What's the hourly cost of compensating a CEO (not considering the $500,000 cap, which is a whole other issue)? It's probably not far from $10,000 per hour.

There is absolutely no reason they cannot get some fractional jet ownership or buy chartered hours in advance. There is absolutely no reason to have C-level people on bank owned jets. In my mind its outside of the banks primary purpose, just as they aren't in the business of owning residential real estate (normally), they aren't in the business of collecting and operating a fleet of private aircraft.

[palmetto75]

This is probably the lone voice on this site defending private aviation, but you just can't have C-level people waiting in security lines, waiting in a terminal, and sitting on a runway for 2 and a half hours, without the means to perform C-level functions.

Although they don't have to wait in line at security (express lane for First Class) nor sit in the terminal (President's Club), I agree that commercial aviation is indeed a waste of time for them. Felt the same way about the execs driving to Washington at the salary rate of $10,000/her per head.

[HopHead]

With all the options for connectivity out there, especially available to C-Level people, it's not a waste of time for them to sit in a terminal or USA club while waiting for a flight. With blackberries and laptops that have wireless Internet they can be very productive. To me you can be a heck of a lot more cost efficient by having a blackberry, laptop and a $200 airline ticket that'll probably be upgraded anyways, then have your limo drop you off at the Executive terminal to fly a $10k/hour corporate jet. Don't get me wrong, there are scenarios where a CEO will need a flight pronto, but that's definitely not every time they have to travel to meet with associates or customers.

[monsoon]

The whole premise of these jets being worthwhile is based on the notion that someone is worth $10,000/hour. They aren't. These days are quickly coming to an end.