Friday, March 6, 2009

Merrill Trading “Irregularity…”

For all those who might believe that “funny business” may be happening with the markets, look no further than the cockroaches now seeing the light of day inside of Merrill which is now inside of Bank of America (BAC).

Oooh, that smell… can’t you smell that smell? I think it’s the smell of rotting derivative and debt corposes!

Lynyrd Skynyrd - That Smell:

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Most the fraud is now consolidated inside of BAC, JPM, WFC, and GS. These companies permeated the globe with trash and have had government backing to help them consolidate and hide what’s been going on. But when the Ponzi is over, you can’t hide forever – and remember, where this is one cockroach there are a thousand more behind the wall.

Merrill Says It Discovered Trading ‘Irregularity’

By Poppy Trowbridge

March 6 (Bloomberg) -- Merrill Lynch & Co., the securities firm acquired by Bank of America Corp., said it uncovered an “irregularity” during a review of its trading operations.

The bank informed regulators immediately of the discrepancy in “certain trading positions”, Merrill Lynch said in a statement from London today. The bank said it’s working with the authorities to investigate further. A spokeswoman for the bank declined to comment further.

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 $33 billion takeover in December and Merrill Lynch disbursed $3.6 billion in bonuses to bankers, the newspaper said. Bank of America later sought additional government funding.

“Senior managers of the business are focused on the issue and believe the risks surrounding possible losses are under control,” Merrill Lynch said in the statement.
Bank of America Chief Executive Officer Kenneth Lewis is trying to rein in Merrill’s traders after their losses brought the bank to the brink of collapse, the New York Times said.

“It was always going to be extremely difficult to integrate a retail bank like Bank of America with an investment bank like Merrill because the cultures are so different,” said Richard Staite, an analyst at Atlantic Equities LLP in London. He has an “underweight” rating on Bank of America’s shares.

Tom Montag
Many of Merrill’s top executives have left since Bank of America’s takeover, including CEO John Thain, Greg Fleming, head of investment banking, and Robert McCann, who led the wealth- management unit. The bank’s markets division is run by Thomas Montag, 52, who Thain hired from Goldman Sachs Group Inc.

Three weeks ago, risk officers discovered that a London currency trader who had recorded a trading profit of $120 million for the fourth quarter may instead have lost a large amount, the New York Times said, citing an unidentified Bank of America executive.

The newspaper identified the employee as Alexis Stenfors, 38. He told the New York Times the matter was a “misunderstanding” and is co-operating with the probe. He remains a Merrill Lynch employee. Calls to his office in London and mobile phone from Bloomberg News weren’t answered.

British regulators are also examining the employee’s trades, the newspaper said. Joseph Eyre, a spokesman for the Financial Services Authority, declined to comment when telephoned today.

The U.K. markets regulator said in August it would investigate some securities firms’ pricing practices after finding valuations were “materially flawed or inadequate.”

First Loss
Bank of America, based in Charlotte, North Carolina, posted its first quarterly loss since 1991 in January and cut the dividend to a penny after receiving $138 billion in emergency government funds to support the Merrill takeover. The fourth- quarter loss of $1.79 billion compared with net income of $268 million the previous year. The bank is cutting as many as 35,000 jobs to reduce annual costs by about $7 billion.

The shares have plummeted 88 percent in New York trading since the Merrill acquisition was announced in September, falling to the lowest level in almost two decades in February. The stock dropped 12 percent in New York trading yesterday to $3.17 for a market value of $20.3 billion.

Does anybody really think that that Merrill contains the only cockroaches? I don’t, Wall Street and the Federal Reserve are permeated with them.

Speaking of cockroaches, I reported back in January on the cockroach Thain: Thain – Pigman Flunky…

And, in case you missed it, here’s Hoofy & Boo asking, “What would John Thain do?