Bloomberg reports: "Merrill Lynch Says It Discovered ‘Irregularity’ in Trading Unit".
Apparently a $120 M gain in currency trading was really a large loss.
Merrill Lynch may have lost hundreds of millions of dollars on currency trading and credit derivatives last year, the New York Times reported earlier today. The losses did not “spill into plain view” until after Bank of America investors had approved the takeover in December and Merrill Lynch disbursed $3.6 billion in bonuses to bankers, the newspaper said.
“Senior managers of the business are focused on the issue and believe the risks surrounding possible losses are under control,” Merrill said in the statement.
In January of 2008, Societe Generale in France reported a multi-billion dollar loss, which it blamed on a single trader. AIG's auditor reported deficiencies in its financial controls long before it failed. Barney Frank assured everyone that Fannie and Freddie were sound not long before they failed. And on an on . . .
Now Calculated Risk reports:
Senate Bill Seeks $500 Billion for FDIC
From the WSJ: Bill Seeks $500 Billion for FDIC Fund
Senate Banking Committee Chairman Christopher Dodd is moving to allow the Federal Deposit Insurance Corp. to temporarily borrow as much as $500 billion from the Treasury Department....
The FDIC would be able to borrow as much as $500 billion until the end of 2010 if the FDIC, Fed, Treasury secretary and White House agree such money is warranted....
The FDIC's deposit-insurance fund has fallen precipitously with 25 bank failures in 2008 and 16 so far in 2009.
It was just last September that the FDIC disputed a story by David Evans at Bloomberg:
Bloomberg reporter David Evans' piece ("FDIC May Need $150 Billion Bailout as Local Bank Failures Mount," Sept. 25) does a serious disservice to your organization and your readers by painting a skewed picture of the FDIC insurance fund. Let me be clear: The insurance fund is in a strong financial position to weather a significant upsurge in bank failures. The FDIC has all the tools and resources necessary to meet our commitment to insured depositors, which we view as sacred. I do not foresee – as Mr. Evans suggests – that taxpayers may have to foot the bill for a "bailout."
CR ends:
I guess the proposed $500 billion is just a loan and not a bailout.
Anyone who knows how this is going to end is just guessing. But almost daily things sound more and more ominous.
Copyright (C) Long Lake LLC 2009
Showing posts with label Merrrill Lynch. Show all posts
Showing posts with label Merrrill Lynch. Show all posts
Friday, March 6, 2009
Sunday, January 25, 2009
Merrill, $15 Billion, and BofA
Zero Hedge blog raises the following question:
Was Merrill Casualty #3 of The Basis Trade After DB Prop and Citadel
Posted by Tyler Durden at 9:48 AM
"In a bet gone very bad, that if true would make Jerome Kerviel's $5 billion loss at Soc Gen seem like amateur hour, the WSJ reports ($$$ link with hat tip to portfolio.com) that the main reason for Merrill's massive $15 billion Q4 loss was due to some very large basis trades gone horribly wrong. We wrote briefly about the basis trade here but now with attention turning more firmly to this topic, it is worth revisiting."
If you're a pro, you might find the entire blog interesting and comprehensible. I'm not and don't get most of it. However, here's what I think I do get. Merrill is suspected of gambling on the eve of being sold for $29/share. It had no need to risk scuttling the deal by gambling. Every gamble of this nature has a counterparty taking the other side of the gamble. That counterparty makes an equal profit to the loser, minus transaction costs if any.
In an article titled "BofA had role in Merrill bonuses", The Financial Times reports today that "In the wake of Mr Thain's dismissal last week, sales and trading chief Tom Montag, his top deputy, received a promotion. Mr Montag's department was responsible for at least half of Merrill's $15bn loss in the fourth quarter."
Why promote a loser such as Mr Montag. Did BofA make a profit as a counterparty while Merrill took huge losses?
Even Inspector Clouseau knew that every misdeed needs a motive. The motive here that makes sense is to dump on Merrill to make BofA look good.
Copyright (C) Long Lake LLC 2009
Was Merrill Casualty #3 of The Basis Trade After DB Prop and Citadel
Posted by Tyler Durden at 9:48 AM
"In a bet gone very bad, that if true would make Jerome Kerviel's $5 billion loss at Soc Gen seem like amateur hour, the WSJ reports ($$$ link with hat tip to portfolio.com) that the main reason for Merrill's massive $15 billion Q4 loss was due to some very large basis trades gone horribly wrong. We wrote briefly about the basis trade here but now with attention turning more firmly to this topic, it is worth revisiting."
If you're a pro, you might find the entire blog interesting and comprehensible. I'm not and don't get most of it. However, here's what I think I do get. Merrill is suspected of gambling on the eve of being sold for $29/share. It had no need to risk scuttling the deal by gambling. Every gamble of this nature has a counterparty taking the other side of the gamble. That counterparty makes an equal profit to the loser, minus transaction costs if any.
In an article titled "BofA had role in Merrill bonuses", The Financial Times reports today that "In the wake of Mr Thain's dismissal last week, sales and trading chief Tom Montag, his top deputy, received a promotion. Mr Montag's department was responsible for at least half of Merrill's $15bn loss in the fourth quarter."
Why promote a loser such as Mr Montag. Did BofA make a profit as a counterparty while Merrill took huge losses?
Even Inspector Clouseau knew that every misdeed needs a motive. The motive here that makes sense is to dump on Merrill to make BofA look good.
Copyright (C) Long Lake LLC 2009
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