Posts filed under “M&A”
Taxpayers should be furious at how they and their money are being treated. Bank of America did not buy Merrill Lynch for the good of the country: It bought it because Ken Lewis thought, wrongly, that he was getting a deal. Ken Lewis should be held accountable for this. Hank Paulson, meanwhile, should immediately disclose exactly what this secret deal was, when he made it, and why:
That some BAO shareholders are calling for Lewis to be fired is not surprising, considering:
* On Dec. 5, Bank of America shareholders approved the Merrill transaction; less than two weeks later, BOA executives were meeting with government officials expressing concern about the size of Merrill-related losses. BOA’s official explanation – “beginning in the second week of December, and progressively over the remainder of the month, market conditions deteriorated substantially…” – rings hollow, at best.
* From the end of 2007 until early September 2008, Merrill had taken over $50 billion in subprime-related losses, according to Bloomberg. Did Lewis and BOA’s management think that was the end of Merrill’s losses?
* Bank of America has now received $45 billion in direct government capital – diluting common shareholders and matching the amount received by industry laggard Citigroup – as well as $118 billion in guarantees for its bad debts.
* Everyone today is focused on the Merrill Lynch deal, but Lewis also acquired Countrywide Financial, the biggest and most aggressive lender of the subprime era. Raise your hand if you think there aren’t huge losses coming from that portfolio.
Alternative title: $%#tty-Group
Oh terrific: We are going to have two medium size piles, instead of one giant compost heap.
Is this going to be a good bank/bad bank split, or is it more accurate to say its a bad bank/worse bank ?
Serious question: Can you name any mega-mergers that have actually worked as advertised? Outside of Oil/commodity firms (Exxon Mobil, Conaco Phillips, BP Amoco are just piles of similar resources), has ANY massive M&A conglomerate actually worked out?
Monster firms all seem to have similar problems: Clash of egos, disparate business lines, frictional corporate cultures.
The one successful example I can think of is Oracle — but they have mostly bought firms started by former employees.
Have any jumbo mergers actually worked out for shareholders?
The United States of Wall Street just added another major holding to its portfolio of financial garbage: Bank of America. Like Citi, BA has now received more MORE IN BAILOUT MONEY than its actually worth. (BAC = $53B; C = $21B) How this can ever be a profitable investment, as some mathematically challenged Congress-critters have…Read More
WSJ’s Evan Newmark and Dennis Berman discuss the latest news from the banking sector, including plans for more aid to Bank of America and concerns about the withholding of information from shareholders. Such lack of disclosure is hurting trust in U.S. financial institutions, Evan argues.
Joshua Rosner is a managing director at the independent research consultancy Graham Fisher & Co., where he advises regulators and institutional investors on housing and mortgage finance issues. Rosner has provided advice on monetary, fiscal, regulatory, and political developments to many of the world’s leading banks, mutual funds, hedge funds, and other institutional investors. Mr. Rosner was among the first analysts to identify operational and accounting problems in the government-sponsored enterprises (GSEs), the peak in the housing market, the likelihood of contagion in credit markets, and the weaknesses in the credit rating agencies’ collateralized debt obligation (CDO) assumptions.
What follows is his most recent commentary on Bank of America:
Ken Lewis must not have listened if his parents told him what mine told me:
-”Don’t buy something you can’t afford”;”
- “Chew before you swallow”;
- “You just got a new toy (Countrywide), you don’t need another now (Merrill)”.
These are lessons our grandparents learned, our parents preached and we forgot. Now, unfortunately, our children will learn it too. Perhaps, for the good of the Republic, the Treasury and our nation’s bankers will as well.
Back stopping Countrywide was premature, buying it was ego driven and, even at the time, buying Merrill seemed plain dumb.
The whole Treasury approach is as dumb as taking equity warrants in a company you may decide is better off in reorganization. How can you teach market participants the lessons of the importance of risk assessment and responsibility if every time a banker blows up his firm you bail him out and then finance his next trade.
Worse yet, Treasury bail’s him out and allows him, without restriction, to use the money to play CDS, not to hedge and put risk back into the market but to speculate.
We need to take large and aggressive action to stop a deflation but the crisis has moved to main street and we can’t keep pretending that bank losses, which will begin to accelerate again (with rising unemployment and commercial losses) can reverse if only we use money to hide them.
We keep hearing DC talk about “when we restructure we must better regulate the large banks”. Hello!?, it has been 18 months since I began loudly calling for the SEC to require more detailed disclosures about the structured holdings of banks and warning of risks for the failure to disclose (see link at bottom). Disclosure is better than regulation and easy to achieve yet we talk as though the Fed and SEC need new powers to achieve these confidence inspiring and risk assessing disclosures.
Step right up to the bar here in Bailout Nation, 2009 version. Open 24 hours, we never close. No bailout too big, no investment/money pit too dumb. Yes folks, we can handle your bad assets, recapitalize your bank, no muss, no fuss. Yes, here in America, we cannot be bothered with things like plans and…Read More
via NYT via WSJ > Sources: Citigroup Plans to Split Itself Up, Taking Apart the Financial Supermarket ERIC DASH NYT, January 13, 2009 http://www.nytimes.com/2009/01/14/business/14citi.html Citigroup Ready to Shrink Itself by a Third DAVID ENRICH WSJ, JANUARY 14, 2009 http://online.wsj.com/article/SB123185686674677225.html
If they are too big to fail, make them smaller.” -Nixon Treasury Secretary George Shultz about Fannie Mae and Freddie Mac > The operative expression about many of the bailouts we have seen — AIG, JP Morgan (via Bear Stearns), Goldman Sachs, Fannie/Freddie and of course Citibank — is “Too Big To Fail.” Perhaps the…Read More