- Did Merrill Lynch have the right not to disclose these realities to their financial advisors?
- Did Merrill Lynch have a duty to their clients to warn of an impending crisis?
- If Merrill Lynch did not have a duty to warn clients, did the clients know they were on their own? (they had no idea)
- Did regulators know about Merrill’s situation?
- Did Merrill mislead regulators?
- If regulators did not know, why?
- Did Merrill Lynch have a duty to inform regulators?
- Were Merrill Lynch and the regulators in cahoots to keep their plight from the public (in order to protect the public)?
- How was Temasek talked into reinvesting in Merrill Lynch at this time? Was full disclosure made?
- What principles were guiding the decision making processes at a firm in the midst of a crisis that posed a systemic risk to the global economy?
Monday, December 6, 2010
The $400 million question for Bank of America
The $400 million question for Bank of America
My guess is that when Wikileaks dumps on Bank of America the “ecosystem of corruption” Assange has referred to in his remarks will be revealed by inquiries centered around the old Watergate question asked by former Senator Howard Baker- “What did they know and when did they know it?”
In August of 2008, I was working on a large renewable fuels deal as a financial advisor at Merrill Lynch. My client wanted to set up an escrow account to facilitate the infusion of an equity investment arranged by Jasper Capital in Dubai. The initial deposit my client wanted to make was $400 million dollars. After two weeks of scouring the organization for the person who could set up this mundane, administrative account, complex director Don Plaus had to inform me that Merrill Lynch would be unable to accommodate my client. This development was perplexing beyond words. Stranger still was Mr. Plaus’ steadfast refusal to offer any explanation.
To this day I do not know why Merrill Lynch was unable to accept these funds (management gave me the “go ahead” to call a competitor who promptly set up the account). I can only speculate that the transfer of foreign currency into the account would have created some liquidity demand the firm was unable to meet. Given the events that befell the firm in September of 2008 30 after this private admission to me by Merrill Lynch management, it is safe to conclude that the firm’s financial condition was the sole reason for this inability to accept a large foreign deposit.
The ramifications of the admission that, in early August of 2008, Merrill Lynch’s ability to conduct business had already started to erode considerably, are immense and wide ranging. One can only speculate on the degree of panic that had gripped the management team in these dark hours. But no legitimate historical review of the crisis will be complete until the psychology of these decision makers is examined in context. The facts are no doubt embarrassing to those involved as they plotted and schemed to preserve shareholder value while attempting to managing a crisis of their own making.
Given the circumstances, I am sure the management team felt they had carte blanch to misrepresent facts and shade the truth to prevent the panic from moving down the organizational chart and out on to Wall Street. Any double talk will be attributed to a concern for the markets.This “concern for the markets” was awfully convenient for this group whose personal fortunes were at risk should the information leak out.
Outside of this claimed altruistic motive, the management team at Merrill Lynch had more undeniable pragmatic concerns. The primary danger, short of a complete financial collapse, was retention of the “Thundering Herd” of financial advisors that represented the core of Merrill’s ability to earn money. If the “Herd” suspect the firm was in serious financial straits, a mad rush out the door would have ensued. There would have been nothing left to sell Bank of America on September 15. My request for a measly escrow account threatened to "out" these guys in a way I am sure was completely out of left field.
The decision makers at Merrill Lynch knew the firm was toast at least by mid August 2008, but probably much earlier. Acknowledgement of this timeline produces a legitimate list of profound questions:
The last question is the most important because these financial institutions still pose a systemic threat to the global economy. I think Assange has been made privy to the same arrogance that colored my experience with this “apparatus.” The attitude of these elitist is beyond comprehension of the average American. On the level playing field of a free enterprise economy such a sense of entitlement does not exist. The systemic necessity of their organization’s success has created in the minds of these Wall Street kingpins an inglorious distortion of the contribution they make to the American standard of living. This distortion is common to those who believe their ends justify their means. Such minds dominate the highest strata in our financial services industry and these grandiose distortions still pull the levers behind Wall Street’s curtain. The eradication of these rascals should have been the silver lining of the crisis but that has not come to pass, yet.
The almost unchallengeable power centered on Wall Street has moved the financial services industry out of the realm of Friedman Capitalism into the oppression of monopoly. Bank of America does business with 1 out of every 2 households in this country! This benefits no one but Bank of America shareholders and the firm’s highly paid bankers. In exchange for this systemic risk, working class Americans receive zilch. Brake Bank of America up now!
If Bank of America decides to share with the public why Merrill Lynch could not accept the $400 million deposit and refused to offer me an explanation, hell will have frozen over. Their arrogance will never allow them to answer such a question; but it should not stop the media from asking the question and demanding an answer. Where is the fourth estate on this matter? I beg the media to step forward and ride to America’s rescue! Bank of America/Merrill Lynch owes the taxpayer an explanation posthaste! There is no need to wait for a Wikileaks document dump. The time is now!
I will have more on Merrill Lynch’s escapades in future blogs. Stay tuned.
Hal Blackwell is the author of “Secrets of the Skim.” You can visit him at halblackwell.com.