Bank Of America Pushed By Government To Do Merrill Lynch Deal
A new report indicates that the US government pushed Bank of America (NYSE:BAC) to take over Merrill Lynch. The report, which didn't name any sources, appeared in the Wall Street Journal yesterday. The Bank of America (NYSE:BAC) deal with Merrill Lynch was struck the same weekend in September that Lehman Brothers went under.
At the time it was widely thought that Merrill Lynch would have suffered the same fate as Lehman Brothers if they hadn't found a suitable suitor.
By December of 2008, Bank of America (NYSE:BAC) executives realized what a toxic collection of assets they had purchased. As losses from Merrill mounted, they looked for a way out. Bank of America (NYSE:BAC) chairman Ken Lewis contacted the U.S. Treasury Secretary Hank Paulson as well as Chairman of the Federal Reserve Ben Bernanke to tell them he had grave reservations about the deal.
According to the Wall Street Journal report, both Paulson and Bernanke pressured BAC to stick to the deal. Federal Reserve officials told BAC that if they did back out, there could be changes on their board. After these conversations, Bank of America (NYSE:BAC) received another $20 billion in funds, as well as a promised the government would cover $118 billion in potential losses.
Investors have reacted to the news of Merrill Lynch losses by fleeing for the exits. Share prices were down almost 12% in yesterday's trading alone.
The sponsorship of stadium naming rights done by Bank of America (NYSE:BAC) , and seven other major banks is also drawing fire. Ohio Democrat Dennis Kucinich says he plans on holding hearings on the issue.
"If you are in trouble financially, you don’t worry about putting your name on a baseball stadium,” said Kucinich. “It’s that simple."
All told, stadium sponsorship deals totaling $872 million are on the books involving companies that have received bailout funds.
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