content        BANK OF AMERICA CORP


Bank of America
The Bank of America Corporate Center, headquarters of Bank of America in Charlotte, North Carolina
Owners Berkshire Hathaway (11.9%) The Vanguard Group (7.1%) BlackRock (6.2%)
Number of employees 208,000 (2019)
Divisions BofA Securities Merrill Bank of America Private Bank
Capital ratio 11.8% (2017)
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Under New Ownership: Bank Of America
CEO Of The Nation's Largest Bank Talks About The Treasury Department's Plans For Buying Into Financial Firms

Oct 19

Banks are supposed to lend money, and when they stop - as they have in recent months - the workings of our entire economy are threatened. Credit became so frozen, the government had to step in this past week and take an ownership stake in the country's biggest banks.

On Monday Treasury Secretary Henry Paulson summoned the CEOs of the nine largest banks to Washington - and gave them a massive amount of money so they would start lending again.

The largest of the banks is Bank of America (B of A) - now partly owned by the United States of America.

The head of Bank of America, Ken Lewis, says that when he and the others met at the Treasury Department, it became clear that Secretary Paulson's "offer" was an ultimatum - no negotiations.

"In other words, take it or leave it?" correspondent Lesley Stahl asked.

"Right. Right, right."

"It's said that he told the bankers and you, "This is your patriotic duty," Stahl said.

"I don't remember if he used the word, but there was an element to that," Lewis said, "that this was the right thing for the American financial system, and therefore it was the right thing for America."

"Did you feel that? Was that a persuasive line of argument?"

"Absolutely," Lewis said. "I deeply believe that. I think he was right on."

"Now explain, why was it so important to the government that everybody agreed, that the nine largest banks are ALL in this?" Stahl asked.

"If you have a bank in that group that really, really needed the capital, you don't want to expose that bank," Lewis said.

"In other words, stigmatize it."

"Right, exactly."

"So everybody knows that they're not as good as somebody else."


"Most of you were just stunned by the amount of money that the government put on the table," Stahl said.

"Yeah," Lewis replied. "At least I was. And I think most everybody else was."

The total was $125 billion of taxpayers' money. Bank of America, Lewis says, didn't need the money … but got $25 billion anyway.

"Do you have any choice in this?" Stahl asked. "In other words, can you take the money and not lend?"

"We wouldn't want to do it that way, because you can make more money lending," Lewis said, "and so the intent will be to use it to grow loans and to make more net income."

But under the Treasury's plan, there's no requirement that a bank use the money to lend. It could use it to acquire weaker competitors - or put it in Treasury bills.

One of the few strings Secretary Paulson attached relates to salaries. A bank would have to pay more taxes if it paid an executive over $500,000 a year.

One of the bankers in the meeting objected, and started arguing with Paulson - and that's when Ken Lewis, a critic of excessive executive compensation, spoke up:

"I did make the point that we needed to stop talking about executive comp and get on with this because that should not stop the deal."

"Actually, you're quoted as saying, 'If this is what's going to stop this, you're out of your mind,'" Stahl said.

"I did use the phrase 'out of your mind.'"

"Because why? Because you thought if it got out publicly … ?"

"No, that the importance of this deal getting done versus these elements of executive comp were just out of sync," Lewis said. "I mean, this was so much more important. And all of us can take a little less money."

With his salary and lucrative stock and options, Lewis took home $25 million last year. But he's one of the few in the business who can be fired without a golden parachute, and he thinks executives on Wall Street have made too much money.

"I think they were overpaid,' he said. "It's more egregious in financial services than any other industry that I know of. We need to cut back compensation in this industry."

"So this is a question everybody wants answered: Is this Socialism?" Stahl asked. "Have we now taken a huge step away from the free-wheeling Capitalism that we've known for the last 30 or so years?"

"I don't know what we'll call it, but it will be different," he said. "And there will be more regulation. The Golden Era of financial services is over, in my opinion."

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About Us

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 Global 500.

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 M&A
A global leader in wealth management, private banking and retail brokerage

Merrill Lynch Wealth Management is the wealth management division of Bank of America.[3] 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.[4] 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.[5] The acquisition was completed in January 2009[6] 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.[7][8]

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.[9] 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.[10][11] 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 execution.[12]
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.[13] 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.[13] and was briefly known as Merrill Lynch, E. A. Pierce, and Cassatt.[14] 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 & Beane.[15]
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.[16]
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.[17] 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.[18]
Rise to prominence[edit]
Merrill Lynch rose to prominence on the strength of its brokerage network (15,000+ as of 2006),[19] sometimes referred to as the "thundering herd", that allowed it to place securities it underwrote directly.[20] In contrast, many established Wall Street firms, such as Morgan Stanley, relied on groups of independent brokers for placement of the securities they underwrote.[21] Until as late as 1970, it was known as the "Catholic" firm of Wall Street.[22] 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".[23] 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[edit]
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[edit]
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.[24] O'Neal had earlier approached Wachovia bank for a merger, without prior Board approval, but the talks ended after O'Neal's dismissal.[24] Merrill Lynch named John Thain as its new CEO that month.[24] 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.[25][26] 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.[27] The deal raised over $6 billion.[27]
In July 2008, Thain announced $4.9 billion fourth quarter losses for the company from defaults and bad investments in the ongoing mortgage crisis.[28] In one year between July 2007 and July 2008, Merrill Lynch lost $19.2 billion, or $52 million daily.[28] The company's stock price had also declined significantly during that time.[28] 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.[29] Temasek Holdings agreed to purchase the funds and increase its investment in the company by $3.4 billion.[30]
Andrew Cuomo, New York Attorney General, threatened to sue Merrill Lynch in August 2008 over its misrepresentation of the risk on mortgage-backed securities.[31] A week earlier, Merrill Lynch had offered to buy back $12 billion in auction-rate debt and said it was surprised by the lawsuit.[31] 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.[32] 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.[33] On September 5, 2008 Goldman Sachs downgraded Merrill Lynch's stock to "conviction sell" and warned of further losses at the company.[34] Bloomberg reported in September 2008 that Merrill Lynch had lost $51.8 billion on mortgage-backed securities as part of the subprime mortgage crisis.[34]
CDO controversies[edit]
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.[35] 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".[36] 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.[37] 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.[38] 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 loan.[39][40]
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.[41][42][43]
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 ago".[44][45][46][47]
Sale to Bank of America[edit]
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.[48][49] 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.[50] 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.[51] 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,[52] but that also meant a discount of 61% from its September 2007 price.[53] 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 Lynch.[54][55][56]
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.[57][58]
Regulatory actions[edit]
Analyst Research settlement[edit]
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.[59]
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 disgorgement.
The CEO at that time, David Komansky, said, "I 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[edit]
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.[60]
Discrimination charges[edit]
On June 26, 2007, the U.S. Equal Employment Opportunity Commission (EEOC) brought suit against Merrill Lynch,[61] alleging the firm discriminated against Dr. Majid Borumand because of his Iranian nationality and Islamic religion, with "reckless disregard" for his protected civil rights.[62] 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.[63][64][65] Merrill Lynch's actions prompted reactions from both the National Iranian-American council, and the American-Arab Anti-Discrimination Committee.[66]
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.[67] 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 the rankings.[68]
New Jersey appeals court on August 13, 2008 rendered a ruling against Merrill Lynch in a discrimination lawsuit filed by a gay employee.[69]
Market timing settlement[edit]
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 long-term investors.[70]
2008 bonus payments[edit]
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.[71][72]
Industry awards[edit]
Ranked No.1 in Barron's 2010 Top 1000 Advisors[73]
Ranked No.1 in Barron's 2010 list for most advisors with No. 1 ranking in their state[73]
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 state
Institutional Investor
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 survey
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 survey
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 teams
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 “Dazzling Dozen”
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
Financial Times/StarMine
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 Recommendations[74]
At The Banker's Investment Banking Awards, 2013, Bank of America Merrill Lynch won "Most Innovative Investment Bank"[75]
Organizational Structure[edit]
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.”).[76]
Merrill Lynch as a subsidiary[edit]
Merrill Lynch is a subsidiary company that is entirely owned by Bank of America (“Merrill Lynch”).[77] 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”).[78] Instead, as principal subsidiary, Merrill Lynch lends and borrows with Bank of America to provide a more centralized liquidity management (“Merrill Lynch”).[78]
See also[edit]
Portal icon Companies portal
Comparison of online brokerages
Calibuso, et al. v. Bank of America Corp., et al.
Credit crisis
Credit squeeze
Global settlement
Liquidity crisis
Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Dabit, a 2006 Supreme Court case involving securities fraud claims.
Merrill Lynch's Application
Primary dealers
World Wealth Report
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Further reading[edit]
Farrell, Greg (2010). Crash of the Titans: Greed, Hubris, the Fall of Merrill Lynch, and the Near-Collapse of Bank of America. New York: Crown Business. ISBN 978-0-307-71786-3.
Perkins, Edwin (1999). Wall Street to Main Street: Charles Merrill and Middle-Class Investors. New York: Cambridge University Press. ISBN 978-0-521-63029-0.
Stiles, Paul (1998). Riding the Bull: My Year in the Madness at Merrill Lynch. New York: Times Business. ISBN 978-0-8129-2789-4.
External links[edit]
Official website
Total Merrill Website
Yahoo! Finance – "Merrill Lynch & Co., Inc. Company Profile"
Merrill Lynch Names Thomas J. Sanzone As Chief Administrative Officer
"Blundering Herd" by Bethany McLean and Joe Nocera, Nov 2010 Vanity Fair p. 179
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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 refinancing.

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 litigation.

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 quick profits.

“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 Mortgages.

Bank of America Settles S.E.C. Case on $4 Billion Accounting Error
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 2009.

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.