Mar 14, 2010
William Penn grad Rossi named Delaware Market president for Bank of
Bank of America Global Corporate Social Responsibility and Consumer
Policy Executive Andrew Plepler announced that Salvatore J. “Chip”
Rossi has been named Delaware market president. Born and reared in
Delaware, Rossi has been with the company since his days as a
As market president, Rossi will lead Bank of America’s civic and
philanthropic efforts throughout the state and play a central role
in developing new business for the company. Bank of America operates
employment sites near Newark.
In addition to being the international headquarters for Global Card
Services, the bank operates a number of other businesses in the
market including Consumer and Small Business Banking, Commercial
Banking, Home Loans and Insurance, and Global Wealth Management.
Plepler said, “In his new role, Chip will work to strengthen
communication and integration among the company’s local business
lines, grow revenue in the region and deliver on Bank of America’s
longstanding commitment to the communities where our associates live
Rossi takes over for Tim Huval, who has accepted a new position with
Plepler continued, “As a lifelong Delaware resident with a history
of civic involvement, Chip is the perfect candidate to carry on our
tradition of service and giving throughout the state.”
Over the past three years, Bank of America associates in Delaware
have volunteered more than 300,000 hours to local nonprofits and
continue to be significant players in major philanthropic
initiatives, including the United Way campaign.
In addition to his responsibilities as market president, Rossi is
the Credit executive for the Deposits and Card Products
organization. He is responsible for aligning credit and risk
strategies across the business to drive revenue growth capabilities.
He has held management positions at all levels within the Customer
Assistance and Credit divisions.
Rossi grew up in New Castle, attended William Penn High School and
graduated from Gettysburg College, where he majored in management.
He resides in Wilmington with his wife and two daughters, and is an
active supporter of Wilmington Friends School. He also serves on the
board of the Grand Opera House.
Salvatore J. Rossi - 2012, 2011, 2010
Credit Executive, Delaware Market President - Bank of America
Chip Rossi is the Preferred Products executive within the Consumer &
Small Business Products organization, as well as the Delaware Market
President. As Preferred Products executive, he is responsible for
building relationships with preferred customers by delivering home
loans solutions to qualified applicants. Solutions include home loan
products with differentiated features and services that reward
customers for their relationship with Bank of America and offer
benefits when customers do more business with us. In the role of
Delaware Market President, Rossi provides executive leadership for
Bank of America in the state of Delaware by engaging in and
supporting activities related to local businesses, civic and
philanthropic causes, and championing Bank of America involvement in
Prior to his current roles, Rossi was Unsecured Borrowing and Small
Business Products executive, where he was responsible for delivering
card and non-card solutions that meet the unsecured borrowing needs
of Bank of America's consumer customers. In addition, Rossi was
responsible for the development and management of all small business
products, including checking, debit and credit card, partnering
closely with Business Banking to ensure Bank of America is providing
financial solutions that meet the needs of all small business
customers and clients.
Rossi began his career as a college intern and joined the company
full-time in 1989 as a participant in the Management Development
Program. He has held management positions at all levels in Customer
Assistance and Credit. Rossi also led the Loss Prevention team with
accountability for credit and fraud losses. He later became Credit &
Underwriting executive, where he oversaw credit and risk functions
for the company's credit card portfolio. In this role, Rossi focused
on the alignment of credit and risk strategies to ensure appropriate
balance growth and risk mitigation.
Rossi graduated from Gettysburg College where he majored in
Management. Rossi is actively involved with Wilmington Friends
School as well as the Gettysburg Alumni Association. He serves on
the boards of the Grand Opera House and the Delaware Community
Foundation in Wilmington, where he lives with his family.
Bank of America is one of the world's largest financial institutions, serving
individual consumers, small and middle market businesses and large corporations
with a full range of banking, investing, asset management and other financial
and risk-management products and services. The company provides unmatched coThe
1933 Glass-Steagall Act erected barriers keeping commercial banks separate from
investment banks. Its restrictions were repealed in 1999.nvenience in the United
States, serving more than 59 million consumer and small business relationships
with more than 6,100 retail banking offices, more than 18,000 ATMs and
award-winning online banking with more than 25 million active users. Bank of
America offers industry leading support to more than 4 million small business
owners through a suite of innovative, easy-to-use online products and services.
The company serves clients in more than 150 countries and has relationships with
99 percent of the U.S. Fortune 500 companies and 83 percent of the Fortune
Following the combination with Merrill Lynch, Bank of America has become:
The largest brokerage in the world, with more than 15,000 Financial Advisors and
approximately $2.2 trillion in client assets
A leading provider of global corporate and investment banking services,
including commercial lending, global high-yield debt, global equity and global
A global leader in wealth management, private banking and retail brokerage
Merrill Lynch Wealth Management is the wealth management division of Bank of
America. It is headquartered in New York City, and occupies the entire 34
stories of the Four World Financial Center building in Manhattan. With over
15,000 financial advisors and $2.2 trillion in client assets, it is the world's
largest brokerage. It has its origins in Merrill Lynch & Co., Inc., which
prior to 2009 was publicly owned and traded on the New York Stock Exchange under
the ticker symbol MER. Merrill Lynch & Co. agreed to be acquired by Bank of
America on September 14, 2008, at the height of the 2008 Financial Crisis.
The acquisition was completed in January 2009 and Merrill Lynch & Co., Inc.
was merged into Bank of America Corporation in October 2013, although certain
Bank of America subsidiaries continue to carry the Merrill Lynch name, including
the broker-dealer Merrill Lynch, Pierce, Fenner & Smith.
The company was founded on January 6, 1914, when Charles E. Merrill opened his
Charles E. Merrill & Co. for business at 7 Wall Street in New York City. A few
months later, Merrill's friend, Edmund C. Lynch, joined him, and in 1915 the
name was officially changed to Merrill, Lynch & Co. At that time, the firm's
name included a comma between Merrill and Lynch. In 1916, Winthrop H. Smith
joined the firm.
Merrill Lynch logo c. 1917
In its early history, Merrill, Lynch & Co. made several successful investments.
In 1921, the company purchased Pathé Exchange, which later became RKO Pictures.
In 1926, the firm made its most significant financial investment at the time,
purchasing a controlling interest in Safeway, transforming the small grocery
store into the country's third largest grocery store chain by the early 1930s.
In 1930, Charles Merrill led the firm through a major restructuring,
spinning-off the company's retail brokerage business to E.A. Pierce & Co. to
focus on investment banking. Along with the business, Merrill also
transferred the bulk of its employees, including Edmund C. Lynch and Winthrop H.
Smith. Charles Merrill received a minority interest in E.A. Pierce in the
transaction. Throughout the 1930s, E.A. Pierce remained the largest brokerage in
the U.S. The firm, led by Edward A. Pierce, Edmund Lynch and Winthrop Smith
would also prove one of the most innovative in the industry, introducing IBM
machines into the business' record keeping. Additionally, by 1938, E.A. Pierce
would control the largest wire network with a private network of over 23,000
miles of telegraph wires. These wires were typically used for trade
E.A. Pierce & Co. logo
E.A. Pierce & Co. (above) merged with Merrill Lynch in 1940. The following year
Fenner & Beane (below) was acquired by the firm
Fenner & Beane logo
Despite its strong position in the market, E.A. Pierce was struggling
financially in the 1930s and was thinly capitalized. Following the death of
Edmund C. Lynch in 1938, Winthrop Smith began discussions with Charles E.
Merrill, who owned a minority interest in E.A. Pierce about a possible merger of
the two firms. On April 1, 1940, Merrill Lynch, merged with Edward A. Pierce's
E.A. Pierce & Co. and Cassatt & Co., a Philadelphia-based brokerage firm in
which both Merrill Lynch and E.A. Pierce held an interest. and was briefly
known as Merrill Lynch, E. A. Pierce, and Cassatt. The company became the
first on Wall Street to publish an annual fiscal report in 1941.
Merrill Lynch, Pierce, Fenner & Smith logo in use prior to the firm's 1974
rebranding that introduced the "bull" logo
The following year, in 1941, Merrill Lynch, E. A. Pierce and Cassatt merged with
Fenner & Beane, a New Orleans-based investment bank and commodities company.
Throughout the 1930s, Fenner & Beane was consistently the second largest
securities firm in the U.S. The combined firm, which became the clear leader in
securities brokerage in the U.S., was renamed Merrill Lynch, Pierce, Fenner &
In 1952, the company formed Merrill Lynch & Co. as a holding company and
officially incorporated after nearly half a century as a partnership. On
December 31, 1957, The New York Times referred to that name as "a sonorous bit
of Americana" and said "After sixteen years of popularizing [it], Merrill Lynch,
Pierce, Fenner, and Beane is going to change it—and thereby honor the man who
has been largely responsible for making the name of a brokerage house part of an
American saga," Winthrop H. Smith, who had been running the company since 1940.
The merger made the company the largest securities firm in the world, with
offices in over 98 cities and membership on 28 exchanges. At the start of the
firm's fiscal year on March 1, 1958, the firm's name became 'Merrill Lynch,
Pierce, Fenner & Smith' and the company became a Big Board member of the New
York Stock Exchange.
In 1964, Merrill Lynch acquired C. J. Devine & Co the leading dealer in U.S.
Government Securities. The merger came together due to the death of Christopher
J. Devine in May 1963. The C. J. Devine & Co. partners, referred to as "The
Devine Boys", formed Merrill Lynch Government Securities Inc., giving the firm a
strong presence in the government securities market. The Government Securities
business brought Merrill Lynch the needed leverage to establish many of the
unique money market products and government bond mutual fund products,
responsible for much of the firm's growth in the 1970s and 1980s.
Rise to prominence
Merrill Lynch rose to prominence on the strength of its brokerage network
(15,000+ as of 2006), sometimes referred to as the "thundering herd", that
allowed it to place securities it underwrote directly. In contrast, many
established Wall Street firms, such as Morgan Stanley, relied on groups of
independent brokers for placement of the securities they underwrote. Until
as late as 1970, it was known as the "Catholic" firm of Wall Street. The
firm went public in 1971 and became a multinational corporation with over US
$1.8 trillion in client assets, operating in more than 40 countries around the
world. In 1977, the company introduced its Cash Management Account (CMA), which
enabled customers to sweep all their cash into a money market mutual fund, and
included check-writing capabilities and a credit card. Fortune magazine called
it "the most important financial innovation in years". In 1978, it
significantly buttressed its securities underwriting business by acquiring White
Weld & Co., a small but prestigious old-line investment bank. Merrill Lynch was
well known for its Global Private Client services and its strong sales force.
Orange County settlement
Merrill Lynch settled with Orange County, California, for a massive $400 million
to settle accusations that it sold inappropriate and risky investments to former
county treasurer Robert Citron. Citron lost $1.69 billion, which forced the
county to file for bankruptcy in December 1994. The county sued a dozen or more
securities companies, advisors and accountants, but Merrill settled without
admitting liability in June 1998. The county was able to recover about $600
million in total, including the $400 million from Merrill.
Subprime mortgage crisis
Main article: 2007 subprime mortgage financial crisis
In November 2007, Merrill Lynch announced it would write-down $8.4 billion in
losses associated with the national housing crisis and remove E. Stanley O'Neal
as its chief executive. O'Neal had earlier approached Wachovia bank for a
merger, without prior Board approval, but the talks ended after O'Neal's
dismissal. Merrill Lynch named John Thain as its new CEO that month. In
his first days at work in December 2007, Thain made changes in Merrill Lynch's
top management, announcing that he would bring in former NYSE colleagues such as
Nelson Chai as CFO and Margaret D. Tutwiler as head of communications.
Late that month, the firm announced it would sell its commercial finance
business to General Electric and sell off major shares of its stock to Temasek
Holdings, a Singapore government investment group, in an effort to raise
capital. The deal raised over $6 billion.
In July 2008, Thain announced $4.9 billion fourth quarter losses for the company
from defaults and bad investments in the ongoing mortgage crisis. In one
year between July 2007 and July 2008, Merrill Lynch lost $19.2 billion, or $52
million daily. The company's stock price had also declined significantly
during that time. Two weeks later, the company announced the sale of select
hedge funds and securities in an effort to reduce their exposure to mortgage
related investments. Temasek Holdings agreed to purchase the funds and
increase its investment in the company by $3.4 billion.
Andrew Cuomo, New York Attorney General, threatened to sue Merrill Lynch in
August 2008 over its misrepresentation of the risk on mortgage-backed
securities. A week earlier, Merrill Lynch had offered to buy back $12
billion in auction-rate debt and said it was surprised by the lawsuit. Three
days later, the company froze hiring and revealed that it had charged almost $30
billion in losses to their subsidiary in the United Kingdom, exempting them from
taxes in that country. On August 22, 2008, CEO John Thain announced an
agreement with the Massachusetts Secretary of State to buy back all auction-rate
securities from customers with less than $100 million in deposit with the firm,
beginning in October 2008 and expanding in January 2009. On September 5,
2008 Goldman Sachs downgraded Merrill Lynch's stock to "conviction sell" and
warned of further losses at the company. Bloomberg reported in September
2008 that Merrill Lynch had lost $51.8 billion on mortgage-backed securities as
part of the subprime mortgage crisis.
Merrill Lynch, like many other banks, became heavily involved in the
mortgage-based collateralized debt obligation (CDO) market in the early 2000s.
According to an article in Credit magazine, Merrill's rise to be the leader of
the CDO market began in 2003 when Christopher Ricciardi brought his CDO team
from Credit Suisse First Boston to Merrill. In 2005 Merrill took out
advertisements in the back of Derivatives Week magazine, touting the fact that
its Global Markets and Investing Group was the "#1 global underwriter of CDOs in
2004". To provide a ready supply of mortgages for the CDOs, Merrill
purchased First Franklin Financial Corp., one of the largest subprime lenders in
the country, in December 2006. BusinessWeek would later describe how between
2006 and 2007, Merrill was "lead underwriter" on 136 CDOs worth $93 billion. By
the end of 2007, the value of these CDOs was collapsing, but Merrill had held
onto portions of them, creating billions of dollars in losses for the
company. In mid-2008, Merrill sold a group of CDOs that had once been valued
at $30.6 billion to Lone Star Funds for $1.7 billion in cash and a $5.1 billion
In April 2009, bond insurance company MBIA sued Merrill Lynch for fraud and five
other violations. These were related to the credit default swap "insurance"
contracts Merrill had bought from MBIA on four of Merrill's mortgage-based
collateralized debt obligations. These were the "ML-Series" CDOs, Broderick CDO
2, Highridge ABS CDO I, Broderick CDO 3, and Newbury Street CDO. MBIA claimed,
among other things, that Merrill defrauded MBIA about the quality of these CDOs,
and that it was using the complicated nature of these particular CDOs (CDOs
squared and cubed) to hide the problems it knew about in the securities that the
CDOs were based on. However, in 2010 Justice Bernard Fried disallowed all but
one of the charges: the claim by MBIA that Merrill had committed breach of
contract by promising the CDOs were worthy of an AAA rating when, it alleges, in
reality they weren't. When the CDOs lost value, MBIA wound up owing Merrill a
large amount of money. Merrill disputed MBIA's claims.
In 2009 Rabobank sued Merrill over a CDO named Norma. Rabobank later claimed
that its case against Merrill was very similar to the SEC's fraud charges
against Goldman Sachs and its Abacaus CDOs. Rabobank alleged that a hedge fund
named Magnetar Capital had chosen assets to go into Norma, and allegedly bet
against them, but that Merrill had not informed Rabobank of this fact. Instead,
Rabobank alleges that Merrill told it that NIR Group was selecting the assets.
When the CDO value tanked, Rabobank was left owing Merrill a large amount of
money. Merrill disputed the arguments of Rabobank, with a spokesman claiming
"The two matters are unrelated and the claims today are not only unfounded but
weren’t included in the Rabobank lawsuit filed nearly a year
Sale to Bank of America
Main article: Bank of America
Significant losses were attributed to the drop in value of its large and
unhedged mortgage portfolio in the form of collateralized debt obligations.
Trading partners' loss of confidence in Merrill Lynch's solvency and ability to
refinance short-term debt ultimately led to its sale. During the week of
September 8, 2008, Lehman Brothers came under severe liquidity pressures, with
its survival in question. If Lehman Brothers failed, investors were afraid that
the contagion could spread to the other surviving investment banks. (Lehman
Brothers filed bankruptcy on September 15, 2008, after government officials
could not find a merger partner for it.) On Sunday, September 14, 2008, Bank of
America announced it was in talks to purchase Merrill Lynch for $38.25 billion
in stock. The Wall Street Journal reported later that day that Merrill Lynch
was sold to Bank of America for 0.8595 shares of Bank of America common stock
for each Merrill Lynch common share, or about US$50 billion or $29 per
share. This price represented a 70.1% premium over the September 12 closing
price or a 38% premium over Merrill's book value of $21 a share, but that
also meant a discount of 61% from its September 2007 price. Congressional
testimony by Bank of America CEO Kenneth Lewis, as well as internal emails
released by the House Oversight Committee, indicate that Bank of America was
threatened with the firings of the management and board of Bank of America as
well as damaging the relationship between the bank and federal regulators, if
Bank of America did not go through with the acquisition of Merrill
In March 2009 it was reported that in 2008, Merrill Lynch received billions of
dollars from its insurance arrangements with AIG, including $6.8 billion from
funds provided by the United States taxpayers to bail out AIG.
Analyst Research settlement
In 2002, Merrill Lynch settled for a fine of $100 million for publishing
misleading research. As part of the agreement with the New York attorney general
and other state securities regulators, Merrill Lynch agreed to increase research
disclosure and work to decouple research from investment banking.
A well known analyst at Merrill Lynch named Henry Blodget wrote in company
e-mails in which Blodget gave assessments about stocks which conflicted with
what was publicly published by Merrill. In 2003, he was charged with civil
securities fraud by the U.S. Securities and Exchange Commission. He settled
without admitting or denying the allegations and was subsequently barred from
the securities industry for life. He paid a $2 million fine and $2 million
The CEO at that time, David Komansky, said, "I want...to publicly apologize to
our clients, our shareholders, and our employees," for the company falling short
of its professional standards in research.
Enron/Merrill Lynch Nigerian barge
In 2004 convictions of Merrill executives marked the only instance in the Enron
investigation where the government criminally charged any officials from the
banks and securities firms that allegedly helped the energy giant execute its
accounting fraud. The case revolved around a 1999 transaction involving Merrill,
Enron and the sale of some electricity-producing barges off the coast of
Nigeria. The charges alleged that the 1999 sale of an interest in Nigerian
energy barges by an Enron entity to Merrill Lynch was a sham that allowed Enron
to illegally book about $12 million in pretax profit, when in fact there was no
real sale and no real profit.
Four former Merrill top executives and two former midlevel Enron officials faced
conspiracy and fraud charges. Merrill cut its own deal, firing bankers and
agreeing to the outside oversight of its structured-finance transactions. It
also settled civil fraud charges brought by the U.S. Securities and Exchange
Commission, without admitting or denying fault.
On June 26, 2007, the U.S. Equal Employment Opportunity Commission (EEOC)
brought suit against Merrill Lynch, alleging the firm discriminated against
Dr. Majid Borumand because of his Iranian nationality and Islamic religion, with
"reckless disregard" for his protected civil rights. The EEOC lawsuit
maintains that violations by members of the firm were intentional and committed
with malice. In another case concerning mistreatment of another Iranian employee
by Merrill Lynch on July 20, 2007, a NASD arbitration panel ordered Merrill
Lynch to pay its former Iranian employee, Fariborz Zojaji, $1.6 million for
firing him due to his Persian ethnicity. Merrill Lynch's actions
prompted reactions from both the National Iranian-American council, and the
American-Arab Anti-Discrimination Committee.
In its June 2008 issue, Diversity Inc. named Merrill Lynch one of the top 10
companies for lesbian, gay, bisexual, and transgendered employees, and the No.7
top company in the US for diversity overall. In 2007, Merrill Lynch was named
the No.2 best company in the US for people with disabilities by Diversity
Magazine. As of June 5, 2008, Merrill Lynch has created the West Asian,
Middle Eastern and North African (WAMENA) Professional Network to help support
and provide additional resources for employees of diverse backgrounds. In May
2008, Merrill Lynch was named the No.1 US company for "Diverse College
Graduates" by Diversity Edge magazine, edging out Microsoft for the top spot on
New Jersey appeals court on August 13, 2008 rendered a ruling against Merrill
Lynch in a discrimination lawsuit filed by a gay employee.
Market timing settlement
In 2002 Merrill Lynch settled for a $10 million civil penalty as a result of
improper activities that took place out of the firm's Fort Lee New Jersey
office. Three financial advisors, and a fourth who was involved to a lesser
degree, placed 12,457 trades for a client Millennium Partners in at least 521
mutual funds and 63 mutual fund sub-accounts of at least 40 variable annuities.
Millennium made profits in over half of the funds and fund sub-accounts. In
those funds where Millennium made profits, its gains totaled about $60 million.
Merrill Lynch failed to reasonably supervise these financial advisers, whose
market timing siphoned short-term profits out of mutual funds and harmed
2008 bonus payments
Merrill Lynch arranged for payment of billions in bonuses in what appeared to be
"special timing". These bonuses totaling $3.6 billion were one-third of the
money they received from the feds' TARP bailout.
The Merrill bonuses were determined by Merrill's Compensation Committee at its
meeting of December 8, 2008, shortly after BOA shareholders approved the merger
but before financial results for the fourth quarter had been determined. This
appeared to be a departure from normal company practice, since the type of bonus
Merrill awarded was a performance bonus that, according to company policy, was
supposed to reflect all four quarters of performance and was paid in January or
later. In this case, however, the bonuses were awarded in December before
fourth-quarter performance had been determined.
They were also very large relative to the TARP monies allocated to Merrill. The
Merrill bonuses were the equivalent of 36.2% of TARP monies Treasury allocated
to Merrill. Merrill employees had to have a salary of at least $300,000 and have
attained the title of Vice President or higher to be eligible.
Ranked No.1 in Barron's 2010 Top 1000 Advisors
Ranked No.1 in Barron's 2010 list for most advisors with No. 1 ranking in their
Ranked No.1 in Barron's 2009 Top 1000 Advisors
Ranked No.1 in Barron's 2009 list for most advisors with No. 1 ranking in their
Ranked No.3 in 2009 All-America Fixed-Income Research Team Survey
Ranked No.1 for Pan European coverage in the 2009 All-Europe Research team
Ranked No.3 in 2009 for Emerging EMEA coverage
Ranked No.3 in the 2009 All-Latin America survey and No.2 in the All-Brazil
Ranked No.5 in the 2009 All-Asia Research team survey
Ranked No.3 in 2009 All-America Equity Research Team Survey
Alpha Magazine – Ranked No.3 by hedge funds in survey for All-Asia research
Forbes/Zacks – Best Brokerage for stock picking and estimate accuracy; captured
more than twice the awards of the runner-up. Seven out of 12 analysts named to
Wall Street Journal “ Best on the Street Stock Picking” Award – No.3 in the
U.S.; 17 ranked analysts
Thomson Reuters Extel – No.1 for Pan-European Equity Sectors Rsch; No.2 for
Pan-European Equity & Equity Linked Rsch; No.2 for Continental European Small &
Mid Caps Rsch
Ranked No.1 Global Broker, No.1 US Broker; No.2 Europe Broker and No.5 Pan-Asia
Broker; received 42 individual analyst awards (May 2009)
Ranked No.1 in the U.S., No.2 in Latin America, No.2 in Asia Pacific ex-Japan,
No.3 in Developed Europe in the 2009 for earnings forecasts; Ranked No.4 in Asia
Pacific ex-Japan, and No.5 in Latin America in the 2009 for Stock
At The Banker's Investment Banking Awards, 2013, Bank of America Merrill Lynch
won "Most Innovative Investment Bank"
The organization structure of Merrill Lynch stemmed down from John Thain, the
former Chairman, President, and CEO of the firm. Under his direct supervision
are seven vital positions within the overall firm. Presidents, Vice Presidents,
and Chairmen of the variety of sectors within Merrill Lynch, such as investment
banking, typically occupy these positions. Below these upper management
authorities are the lower management employers, who manage a further subdivision
of a particular sector of Merrill Lynch. The lower management employers
supervise the employees who specialize within a sector of the firm, for example,
consultants (“Merrill Lynch & Co, Inc.”).
Merrill Lynch as a subsidiary
Merrill Lynch is a subsidiary company that is entirely owned by Bank of America
(“Merrill Lynch”). Prior to the merger, Merrill Lynch issued debt
instruments to a number of companies. However, once it became a fully owned
entity under Bank of America, Bank of America did not assume the guarantees in
debt offered by Merrill Lynch & Co. (full name while independent firm) (“Merrill
Lynch”). Instead, as principal subsidiary, Merrill Lynch lends and borrows
with Bank of America to provide a more centralized liquidity management
Portal icon Companies portal
Comparison of online brokerages
Calibuso, et al. v. Bank of America Corp., et al.
Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Dabit, a 2006 Supreme Court case
involving securities fraud claims.
Merrill Lynch's Application
World Wealth Report
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Stanley—an outgrowth of J. P. Morgan's financial empire—First Boston, Dillon,
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something of an anomaly, had once been considered the "Catholic" firm. Kidder,
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[show] v t e
Bank of America
A founder of Countrywide Financial warned three years before the housing market
collapsed that his company could face “financial and reputational catastrophe”
if it continued holding certain risky mortgages on its balance sheet. Still,
Countrywide continued to sell these loans to investors.
Bank of America refinanced a $156,491 Countrywide loan for a 24-year-old mobile
home into a government-backed mortgage. The borrower, who also managed to roll
credit-card debt into the loan, was behind on his payments at the time of the
And a Merrill Lynch consultant vented in an internal email that the Wall Street
firm seemed unfazed by issues with mortgage standards. “Makes you wonder why we
have due diligence performed other than making sure the loan closed.”
Documents released as part of the $16.65 billion settlement between Bank of
America and the Justice Department read like a highlight reel of the mortgage
sins that fed the 2008 financial crisis. As part of the deal, the bank and the
Justice Department agreed to a “statement of facts” that offers a window into
some of the darkest corners of the Countrywide and Merrill mortgage machine that
was responsible for funneling a stream of troubled loans that helped devastate
the global financial system.
At this point, six years after the financial crisis, the excesses and failings
of Countrywide and Merrill, which Bank of America acquired, are the stuff of
Wall Street legend. But the 30-page document, which is replete with many
internal emails from the likes of Countrywide’s co-founder, Angelo Mozilo,
underscores the extent of the problems at these firms.
In past federal mortgage settlements, some critics have said the statement of
facts lacked specifics. Some banks’ lawyers have been wary of agreeing to too
many details in these documents, fearing they can provide a road map for future
On Thursday, the Securities and Exchange Commission also struck a settlement
with the bank, which admitted wrongdoing as part of that agreement.
The settlement comes as federal prosecutors in Los Angeles are preparing a
lawsuit against Mr. Mozilo, who built Countrywide into one of the nation’s
largest mortgage lenders before Bank of America acquired the company in 2008.
Mr. Mozilo’s lawyer, David Siegel, said, “There is no sound or fair basis, in
law or fact, to pursue any claim” against his client.
According to the statement of facts, Mr. Mozilo sent an email to a Countrywide
executive on Aug. 1, 2005, warning about a collapse in some condominium markets
in Las Vegas and Florida, which were swarming then with speculators looking for
“I am becoming increasingly concerned about the environment surrounding the
borrowers who are utilizing the pay option loan and the price level of real
estate in general but particularly relative to condos,” Mr. Mozilo wrote,
according to the Justice Department documents.
Mr. Mozilo said Countrywide should stop holding those loans on its books. Yet
for the next two years, according to the documents, Countrywide continued to
originate pay option loans — which had interest rates that would reset after a
few years — and sell them to Wall Street.
The Justice Department documents also show the failings of the government’s
efforts to protect itself against insuring defective mortgages.
One Bank of America employee describes trying to “trick” a system that screened
mortgages that the Federal Housing Administration agreed to insure.
When using this system, Bank of America sometimes changed an applicant’s
financial information and resubmitted the loan many times to try for approval.
In at least one case, a Bank of America underwriter tried to pass the F.H.A.
screening more than 40 times, according to the documents. In other cases,
“underwriters regularly changed the relevant data and resubmitted the loans more
than 20 times,” the documents said.
A version of this article appears in print on 08/22/2014, on page A3 of the
NewYork edition with the headline: Bank Papers Show Conflict and Trickery in
Bank of America Settles S.E.C. Case on $4 Billion Accounting Error
By MICHAEL CORKERY SEPTEMBER 29, 2014 2:01 PM
Bank of America has agreed to pay $7.65 million to settle federal charges that
it violated record keeping and internal rules in overstating its capital levels.
The Securities and Exchange Commission said the bank had failed for years to
properly deduct losses on a large portfolio of structured notes and other
financial instruments that it acquired when it bought Merrill Lynch in early
As a result of the flawed calculations, the bank had overstated the capital
cushion that regulators require the bank to hold by about $4 billion.
The $7.65 million penalty, which is minuscule compared with the $16.65 billion
the bank had paid to settle its mortgage-related misdeeds, caps an embarrassing
flub for Bank of America. In March, the bank had easily passed the Federal
Reserve’s annual stress test, gaining the regulator’s approval to increase its
quarterly dividend for the first time in seven years.
But after disclosing the overstated capital levels in April, the bank was forced
to suspend plans to increase its dividend and $4 billion in stock repurchases,
while it resubmitted its capital plan to the Federal Reserve. The bank’s new
plan includes the originally planned dividend increase to 5 cents a share from 1
cent a share, but does not involve any share repurchases.
In devising the penalty, the S.E.C. noted that Bank of America self-reported the
error and voluntarily took steps to correct the problem.
“This penalty reflects credit for that cooperation, which allowed us to conduct
our investigation efficiently and effectively,” said Andrew J. Ceresney,
director of enforcement for the S.E.C.
Andrew J. Ceresney, director of enforcement for the S.E.C., said the $7.65
million penalty for Bank of America "reflects credit" for the bank's
cooperation. Credit Gary Cameron/Reuters
A version of this article appears in print on 09/30/2014, on page B9 of the
NewYork edition with the headline: Accounting Error.