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.