2009-10-20 11:10:00
Emails Surface That Shed New Light on BAC/MER Deal
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Emails have surfaced over the past couple of days that shed new light on the intense negotiations that took place in the weeks prior to the Bank of America / Merrill Lynch deal closing in early 2009.
One of the more interesting emails came courtesy of Bank of America CFO Joe Price, who informed his colleagues in a December 29th email that "the chairman of the Federal Reserve indicated that it would be structured in a matter such that BAC stock should go up when announced." The "it" in this email was the proposed deal between Bank of America and Merrill Lynch.
A week after the deal was finalized, Fed officials apparently changed their position on the matter.
An email from former BAC treasurer Jeff Brown said that government officials were assigning a high probability to the likelihood that "the market will attack us after learning of the government assistance."
The government provided "$20 billion in fresh capital and a $118 billion backstop on loans and mortgage-based securities" in order for the deal to go through.
Brown claims that the government "just got silent" in the weeks following the closing of the deal.
So what happened to Bank of America's shares in the days and weeks after the deal was finalized?
In short - they were obliterated, losing nearly half of their value in just a few short weeks.
The emails and internal documents were "among more than 1,000 pages of documents sent last week to the House Oversight Committee".
The documents also reveal that:
-BAC and their team of lawyers weren't confident in the fact that they would be able to legally pull out of the deal, despite the fact that losses at Merrill Lynch were quickly mounting
-the government did, in fact, warn Lewis that attempting to pull out of the deal "could result in the removal of the Board and Management" of Bank of America
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The deal between Bank of America and Merrill Lynch eventually went through as planned, much to the detriment of Bank of America shareholders.
I'm sure that a great deal more information will reveal itself about this transaction in the weeks and months ahead.
Source: Bloomberg.com - Bank of America Told Aid May Help Stock, E-Mail Shows
Davemanuel.com - Current BAC Quote
Filed under: The Economic Meltdown
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