Analysis: How Bank of America execs hid losses—in their own words
Bank of America. Still got questions to answer.
When Bank of America announced it was buying Merrill Lynch in September 2008, bank execs told their shareholders that the merger might hurt earnings a touch. It didn’t turn out that way. Losses at Merrill piled upover the next two months, before the deal even closed. Yet the execs kept painting a prettier picture to shareholders — even though it turns out they knew better.
As the New York Times detailed this morning, a brief in a new lawsuit filed in federal court in Manhattan recounts sworn testimony and internal emails in which execs admitted to giving bad information to shareholders and that they had worried about the legal ramifications of doing so.
We’ve pulled out the most revealing parts of the suit, which tell the story of how the deal went down.
On Sept. 15, 2008, Bank of America announced its agreement to buy Merrill Lynch. In the press release announcing the deal and other presentations, Bank of America said it would cause a 3 percent decrease in earnings in 2009, and that by 2010 the deal would break even or do better.
In October, concerns started to emerge about Merrill’s financials. As it became clear the company was going to lose $7.5 billion that month, one exec emailed another the numbers with the message “read and weep.”
Merrill kept losing money in November. Late that month, Bank of America ordered Merrill to sell off assets to try to stabilize its finances:
On Dec. 1, Bank of America issued a $9 billion debt offering. Publicly, they said this was “for general corporate purposes.” But private communications showed that they were trying to raise money to cover Merrill’s losses:
In his deposition for the lawsuit, Lewis said that what he told them was not accurate. Bank of America had already revised their numbers to reflect Merrill’s losses:
Bank of America didn’t comment to the Times on the new lawsuit, and didn’t immediately respond to a request for comment from us.
This article was published by ProPublica.