In the midst of September's Wall Street meltdown, Bank of America agreed to buy the troubled Merrill Lynch -- a buyout that has proved troublesome. Analysts assess what may come next for the struggling industry.
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When the financial crisis broke into the open in September and Lehman Brothers collapsed, the government and many investors on Wall Street were happy to see a shotgun marriage of two financial giants to avoid another bankruptcy.
In a time span of less than 48 hours, Bank of America agreed to buy the troubled Merrill Lynch. Afterward, both CEOs publicly praised the deal.
JOHN THAIN, CEO, Merrill Lynch:
The fact that we can put this transaction together basically in 48 hours I think is a great statement on the strengths of both of our teams, but also the great strategic fit which, from the instant we talked, was very, very clear that this transaction made a lot of sense.
KENNETH LEWIS, CEO, Bank of America: The combined company is a much stronger entity and will survive most anything as a result of the combination.
Since then, however, the combination of the two firms has hardly been smooth. Bank of America's stock value is down more than 80 percent. Merrill Lynch's losses have been much deeper than expected.
And yesterday, Merrill's former chief, John Thain, was forced out from his job at Bank of America. That came amid a series of news reports that Thain paid more than $4 billion in bonuses to Merrill employees just days before the deal formally closed and that he spent more than a million dollars last winter to redecorate his office, including more than $87,000 on a rug, $68,000 on a credenza, and $1,400 on a waste can.
The reports caught the attention of President Obama, who mentioned it earlier today.
U.S. PRESIDENT BARACK OBAMA:
The recovery package that we're passing is only going to be one leg in a — at least a three-legged stool. And some of the reports that we've seen over the last couple of days about companies that have received taxpayer assistance, then going out and renovating bathrooms or offices, or in other ways not managing those dollars appropriately, the lack of accountability and transparency in how we are managing some of these programs to stabilize the financial system, those all have to be part and parcel of a reform package if we're going to be responsible in dealing with this economic crisis.