(The New York Times)
Merrill Lynch was founded in 1914 and heralded the idea that everyone, not just the rich, should invest in the financial markets. That stance made Merrill not only one of the pillars of Wall Street, but a reputation as the stockbroker for Main Street as well. It survived wars and the Great Depression, but succumbed as an independent company to the mortgage meltdown that began in mid-2007. On Sept. 14, 2008, Merrill announced that it had agreed to be purchased by the Bank of America, rather than run the risk of being pulled under by turmoil surrounding the industry, as Bear Stearns and Lehman Brothers had been.
Merrill's logo -- a bull -- had long symbolized the fundamental optimism of Wall Street, and its leaders had often been viewed as spokesman for the entire industry.
In recent years, Merrill had grown to be really two companies. One is a thriving wealth management company with $1.8 trillion of assets that is managed by the firm's army of 16,000 brokers plus a 49 percent interest in Black Rock, a fast growing asset management operation.
The other part is a fixed-income or bond trading operation that invested heavily in relatively high-risk, high-return securities backed by subprime home mortgages. These securities have lost value as housing prices have fallen and the number of foreclosures has grown. In late October, 2007, the company posted a write-down of $8.4 billion to recognize the decline in value of these securities.
Shortly thereafter, E. Stanley O'Neal was removed as chief executive as a result of the losses and an unauthorized merger proposal. On Nov. 14th, John A. Thain, the chief executive of the New York Stock Exchange and a former president of Goldman Sachs, was named as Mr. O'Neal's successor.
Mr. Thain moved quickly to push more of the worst investment out the door, writing off billions while moving to raise more capital. In July he sold $31 billion dollars of securities for pennies on the dollar, asserting that Merrill needed to get the housing crisis behind it.
Mr. Thain's actions were the most drastic of any of the chiefs of the major Wall Street banks, and as recently as Sept. 10th he reassured worried employees that the firm's capital levels were sound. But as Lehman Brothers started to swirl downward toward bankruptcy -- a prospect that held the risk of pulling other firms down with it -- Mr. Thain became convinced that a far more drastic action was needed.
When Treasury Secretary Henry M. Paulson, Jr. called top bankers together on Friday, Sept. 12th for weekend-long talks on saving Lehman, Mr. Thain began discussions with the chief of the Bank of America, Kenneth D. Lewis. By Sunday, they were ready with an announcement that rattled some on Wall Street even more than the news of Lehman's bankruptcy -- the end of Merrill as an independent firm.
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