It’s about time these dirty details started getting some run in the press. In an AP article, we finally have the story behind Bank of America’s takeover of Merrill Lynch. If you were following this at the time, the professional community was scratching their heads thinking, “Why take on the risk and a horrible balance sheet?”
Well, as we now know, it’s because the government pulled out a gun (figuratively, of course) and put it to B of A CEO, Ken Lewis’ head, and told him to acquire Merrill or his career was over. Of course, this was one of many extreme measures that the government implemented during a time when the economy was teetering on the brink of complete failure.
While I’m glad that we didn’t go Iceland and have our financial system completely fail, I’m also a little perturbed with the way in which we averted disaster. Threatening the leader of a private company with his livelihood simply isn’t right and for my conservative friends, this certainly smacks of socialism. Heck, it even sounds a little Cold War Soviet Union.
However, I’m not one to cry over spilled milk and I’m not a Bank of America shareholder, so my qualms are on principle and have no financial consequences. Overall, I probably benefited from this action, but for the many folks that hold Bank of America stock, they have a very legitimate gripe in the fact that their company was forced to takeover an enormous pile of debt. So what are they going to do? Nothing…it’s the government after all.
Several years from now, there will be a slew of interesting books written about the closed door meetings that took place last year when the financial crisis very nearly became our undoing. There will be more detailed accounts of bullying, shady accounting, and of course, greed. When these details emerge, don’t count on public upheaval, but you can bet they’ll make the bestseller list.
All in all, the government did what was necessary and it was ugly, but you can count me as pleased the outcomes weren’t worse.