I should know something about the relation between Merrill and BAC because I have much experience in sports and mergers, but I just am amazed about how much I don't know. Some isolated facts stand out. Apparently Lewis caught the previous BAC's eye because of his dashing characteristics on the softball field of Central Park where in a game, his hard slides helped them beat Citi even though Citi was much bigger. Okay, does playing an aggressive game really qualify one to move up the ladder these days? Apparently it does because the Lehman chief was known for saying to Thain, "He'd cut his heart out if he learned that rumors about L's being in trouble were being spread. And he also liked to beat out opposing fathers or coaches at Little League games if they tried to bully fathers on his side and he was well known for the look in his eyes that scared you in the executive suite and the squash court. It's right out of How to Succeed in Business and I wonder if it's still grounds for demotion if you act sassy with the boss's girlfriend, and whether you still have to sing the college song or take up knitting as a hobby if the boss is into it to get ahead.  

Now on the merger, this is known. The agreement on the deal was announced September 14th at 29 a share in stock for 42 billion. BAC at 34 on sep 22. Deal approved by Merrill shareholders on Dec 5 when stock at 15 and closed on Dec 31 when BAC closed at 14. By Jan 19, BAC was 5. So Merrill shareholders only received 15 billion or 7 billion at most. Merrill had a book value of 37 billion at year end 2007 and lost 27 billion "after" in 2008 bringing book down to 10. They started year with 41 billion in cash and 1 trillion in total assets. Merrrill lost 15 billion in Dec. Thain said he told BAC about the losses when he learned about them. He was acting as CEO and Chief of Trading for the combined entities through the period. He said that the Merrill bonuses were paid in the normal course with BAC approval. The Fed agreed to invest 20 billion in BAC and guarantee 118 billion in assets when the loss was announced. the questions all relate to the timing. How does it happen that a CEO does not know about the losses in his operation, during a period, especially when a merger is being voted on until a few days after the end of the period. Same with respect to bonuses being paid. From what I know about mergers, it's not surprising that both companies wished to merge. Companies like to sell when the lighting is about to strike and pickets are surrounding their factories. Buyers are much more reluctant to pay cash than stock when their business is going well.

Presumably this was a Brer Rabbit and Brer Bear case where both buyer and seller were so reluctant to be thrown into the briar patch that they both needed exhortation from a third party to go through with it. Presumably this had something to do with the additional 20 billion invested on 1/16 by the third party and the 100 billion guarantees. But my questions remain. How could a head man now know about the losses in a fourth quarter until Jan 16 and how could he not have disclosed these earlier to his acquiring company? How could they all have independently bought stocks at 6 a share on Jan 22, including T and l just a few days after the loss was announced, and one day before T was asked to leave? I read that the third party had to come up with the 20 billion and 100 billion because otherwise BAC would have backed out of the deal but how could they do so after the deal had been approved by their stockholders? Were their comparable bad things that each party did not disclose to the others when the stock to stock deal was agreed to? What's the back story here about when T was asked to leave and did it have anything to do with the 1.2 office renovation or more about the failure to disclose the extent of the loss before the stockholders vote, and the executive bonuses were paid out? How does the request by Thain for a bonus for himself of 5 million which was apparently rejected by the directors fit into the puzzle and where were the directors vis a vis disclosure of the losses to all parties in the time line of the agreement the vote and the closing?

I am a babe in arms about this and wish to be clarified so I won't be so naive again after having spent so much time in aggressive sports competition and putting together mergers.

Douglas Dimick writes:

For team sports, I pitched and played firstbase and leftfield in little league for two years, then baseball and basketball in junior high. For high school, though, I spent my winters competing individually at a private ski racing academy in NH.

I worked for four years in the world’s largest law firm (The JAGC) as a legal specialist in the US Army. Then after law school, though, I worked as a trustee for my parents.

While at Georgetown studying literature, I did a consulting job for a beltway firm that provided anti-terrorist training to the State Department. The owner told me: “Son, if you have to compete, you are in the wrong business.”

This man appeared to me to assume responsibility as SOP. He took ownership, initiative to lead on a deal, the business, an issue at hand. If something went wrong, he was the first to step up.

I worked with another man, who had been a key person during the go-go years at Reliance, who was recently barred from the markets as a settlement with the SEC. For him, it appeared to me that he operated from a centricity of ego, from which he would apportion responsibility and blame upon others. I found his style of leadership to be more about avoiding responsibility than accepting it.

Then there is evolution. I understand that V has a collection of seashells – symbolizing spiraling of life, markets, human endeavors, often so traded and reduced to currency?

During R&D of Quantitative Relativity, I studied spiraling (a la Fibonacci) concerning market indicators and function integration. Is the spiral a result of competition, the output of (non)correlated forces struggling for gain (and loss)? Are circling “patterns” (not as an output or state but as a geometric representation) exchange-like flows of the resulting order(s) from a given chaotic condition or event?

Relative to disclosure of losses and bonus issues as so posed in the article, perhaps these matters are merely a continuation of the same dynamics (or energy patterns) spiraling from years of exchanges (or transactions) that have lead markets to their levels of today?

I have found that, when humans compete, rules-based systems are so observed only to the degree that there is (natural or artificial) enforcement. When a runner is at first base and lurching out with thoughts of “stealing” second, the only regulation is governed from the pitcher’s corner eye.

Could we expect anything more (or less) of BAC, Merrill, and their angling minions?

I read the locker-room banter-sites among deal mavens. The mentality appears symptomatic of breast-feeding on how to blindside the umpire – that’s why they require “teams” of lawyers and accountants.

Who thinks that such professional sportsmen follow the rules, regardless of when they play it hard or play it soft? Fans don’t. Why should investors — at least after now?

Here in China, where there are no rules, just party will, striking similarities may be found with the recounted gameplay tactics like “hide the losses from shareholders one day before the vote.” We then need not wait to read the newspapers – government owned or otherwise – to know how these innings end… Badly for all concerned: teams, owners, fans, and the game.

What I learned long after my dairy cow showing during Maine’s fair season was that “winning” is not just about winning. Granted, theoretically, for every trade, there is a winner and a loser.

But we know that is not necessarily true. It is a matter of perspective, as we spiral about our individual and collective ways, which we then – testing variants of humility as ego-centric creatures – externalize, thereby attempting to quantify as a cause or an effect of market timing.

With the Chinese New Year half way through its two-week celebration, I hope that we all might stop and reflect how a 4-H’er may approach the article… Consider, then…

The four “H”s target Life Skills:

•Head Planning & Organizing Problem Solving & Decision Making

•Heart Communication & Cooperation Showing Concern for Others

•Hands Community Service & Volunteering with Others

•Healthy Lifestyles Stress Management & Disease Prevention Character Education


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