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Bank of America’s Shotgun Marriage to Merrill Lynch

by Richard

ken_lewis.jpgYou can’t blame Ken Lewis, the beleaguered CEO of Bank of America, for wanting to quit early.

It’s tough enough trying to manage a universal mega bank, without getting sniped at by the feds and the newly installed board of directors.

The proximate cause of his departure is the hasty decision to acquire Merrill Lynch.

This happened back on black Monday, Sept. 15, 2008, when the financial world teetered at the edge of the abyss…remember, this is the day Lehman Bros went into Bankruptcy, and the taxpayers bought AIG.

The SEC and the courts will work to untangle the issues of inadequate disclosure and the external pressures placed on the bank to close on the deal…after they discovered how rotten the corpse had become.

But no one seems to be focusing on the big picture…which is the attempt to recreate the  so-called financial supermarket.

This was the pell mell acquisition of disparate, but supposedly synergistic financial services under one roof, to offer one stop shopping for clients.

This is also the strategy that made Citigroup both unmanageable and unprofitable.

Just what we need…the forced growth of financial institutions already too big to fail.

Proving that no one is paying attention to the failure of this grand strategy is the latest announcement from Merrill…known as “My Retirement Income”.  You might think this is some unique and proprietary formula to restore the wealth that melted down in the savage bear market.

But it’s just old wine in new bottles.

The cornerstone of the program is the automatic transfer of assets from Merrill’s cash management account into a Bank of America account for spend down.

This “enhancement” is perceived to add value, due to the 6,000 retail banking offices globally, as well as access to more than 18,000 ATMs.

Which would be innovative, if not for the inconvenient fact that anyone with internet access can link brokerage accounts to any depository outlet they wish, with just a few keystrokes.

They just don’t get it.  Years ago, Dean Witter, a once prominent brokerage firm, was acquired by Sears, Roebuck, leading to the derisive tag line of “stocks and socks”. …Not to mention that BofA had already acquired Charles Schwab years earlier, and then disgorged it when they could not successfully meld the two organizations.

The trend now is for investment houses to divest themselves of proprietary funds, which are tainted by the charge that they are flogged on to clients by the mercenary sales force.

Knowledge has shifted to the consumer…

…who now has access to virtually every financial tool and product once exclusively offered by the big wire houses.

The scandal of Merrill’s acquisition by BofA is not that they closed on a deal that they should have walked away from….

…the scandal is that they were still intoxicated by the growth-at-any price ethos that has brought so much grief and damage to our financial systems.

These big bad boys should be divesting and slimming down…not continuing to gorge at the buffet line.

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