From Bloomberg:
I take two things from this. First, it was Bank of America’s greed that drove them to accept the deal. Second, Bernanke is willing to do whatever, and I mean whatever, it takes to prop up the markets. They gave BofA $20b and guaranteed $118b in debt as part of the Merrill deal. It’s insane. And Bernanke thought it would boost BAC stock, and that was perfectly dandy.
Moral hazard, anyone? The fact that BAC ended up crashing is immaterial to me. BofA thought they were getting a sweetheart deal.
Unless somebody checks the Fed’s power, they will print as much as it takes to get out of this. When the current program ends, and everything starts deteriorating, what do you think they’re gonna do? Extend, expand, and print. They will say they didn’t see this downturn coming, that the economy was looking good (and why not, when they’re pumping trillions?). See Flaws in the Deflation Case for more on the general concept, though it is a little dated.
I can’t pass up the opportunity to post this picture by Jesse, even if Lewis may not have been under as much pressure as we thought at the time.
Bank of America Corp. signed off on its government-assisted purchase of Merrill Lynch & Co. after U.S. regulators said the deal might boost the shares, e-mails from two executives showed. Instead, the stock collapsed. “The chairman of the Federal Reserve indicated it would be structured in a manner such that BAC stock should go up when announced,” Chief Financial Officer Joe Price said in a Dec. 29 e-mail to executives of the Charlotte, North Carolina-based bank, including Chief Executive Officer Kenneth D. Lewis.
I take two things from this. First, it was Bank of America’s greed that drove them to accept the deal. Second, Bernanke is willing to do whatever, and I mean whatever, it takes to prop up the markets. They gave BofA $20b and guaranteed $118b in debt as part of the Merrill deal. It’s insane. And Bernanke thought it would boost BAC stock, and that was perfectly dandy.
Moral hazard, anyone? The fact that BAC ended up crashing is immaterial to me. BofA thought they were getting a sweetheart deal.
Unless somebody checks the Fed’s power, they will print as much as it takes to get out of this. When the current program ends, and everything starts deteriorating, what do you think they’re gonna do? Extend, expand, and print. They will say they didn’t see this downturn coming, that the economy was looking good (and why not, when they’re pumping trillions?). See Flaws in the Deflation Case for more on the general concept, though it is a little dated.
I can’t pass up the opportunity to post this picture by Jesse, even if Lewis may not have been under as much pressure as we thought at the time.
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