Mocking the Prez?

A few days ago President Obama, without mentioning names, shouted out against Wall Street bonuses and million dollar redesigns of executive offices, in these "difficult economic times". Aside from the fact that as a Keynesian, Obama should be hailing aggressive spending, as opposed to speaking out against it, Obama didn't have to mention a name when it came to the million dollar office redo. Everyone knew he was talking about former Merrill Lynch CEO John Thain.

Thain sounds like he is having some fun with the President's jab. NyPo's Page Six reports that Thain (who his worth hundreds of millions)...

was having dinner at San Pietro last week with BlackRock Chairman Larry Fink. He loudly told the waiter, for all to hear, "under the circumstances with this tough economy, I think I'll have tap water."

Mock surrender of personal sacrifce for the "greater good", I like the plan. Please pass the tap water.

Wall Street Rapes America, Edition 9

Wall Street is a very tough place, if you don't know what is going on, your money will be taken from you. I can't think of a more outrageous rape of the taxpayer, ever, than the TARP program run by GW Treasury Secretary Henry Paulson. It should be noted that Paulson's lieutenant in the rape of the taxpayer was Timothy Geithenr, who came up short paying his own personal taxes, but managed to help dole out $350 billion in taxpayer money through TARP and is likely to be confirmed by the Senate today as the new Treasury Secretary.

If you get the sense today that someone is laughing at you behind your back, you'll be right. It's Geithner.

Oh yeah, here's the latest outrage.

Merrill Lynch lost $15 billion in the fourth quarter of 2008 and more than $27 billion for the year. In October, Merrill received $10 billion in bailout money. But the problems were so deep that Merrill CEO John Thain(surprise a former Goldman man) sold the company to Bank of America. The actual sale to B of A was a shrewd move by Thain. It does, however make B of A look like it is run by a bunch of country bumpkins,taken advantage of by a New York slickster. We indicated as much at the time, when we wrote:

Has Bank of America Chairman Ken Lewis come to his senses? Has the ether Merrill Chairman John Thain slipped Lewis during his sales pitch to get Lewis to buy Merrill, at a premium to the market price in the middle of a crisis, worn off?

Closing date on the B of A takeover: January 1, 2009.

Employee bonuses at Merrill are normally paid out in January. Since Merrill had lost $27 billion in 2008, it is likely that Bank of America would have looked good and hard before passing out those bonuses. Thain found away around the bonus payout problem, he paid out the bonuses in December, when he was still in full control of the company. Reports indicate the bonuses amounted to between $3 billion and $4 billion.

To recap:

Merrill loses $27 billion.

Treasury gives Merrill $10 billion in bailout money.

Merrill uses the money to payout $3 to $4 billion in bonuses.

Oh yeah, Thain also spends $1.2 million refurbishing his office.

Bottom line: Wall Street has always run circles around the American taxpayer, but the Paulson-Geithner era has brought in such disrespect for the taxpayer that not even Shakespeare would have thought of penning such an open and brazen tragedy.

Middle America better wake up, and with Obama bringing "change" like Geithner into the Treasury, Barack ain't the directon from where they should be looking for change. America is burning.

The Morning Ahead

The factors to monitor in the morning are near overwhelming.

To start, we have an FOMC meeting. Will the Fed cut rates?

Henry Paulson is scheduled to testify before Congress in the morning, and later in the day he is scheduled to give a speech at the Brookings Institute about the economy and housing. He is likely to be very cautious at both venues about what he says. Will he by accident trigger more downside action?

Lehman has filed for Chapter 11 and other banks have continued to trade with it. Yet, despite being in Chapter 11, and presumably under court supervision, Lehman continues to push for a shotgun sale of its money management firm, among other assets. How will this activity sit with the bankruptcy judge and other bankers?

The Merrill Lynch acquisition by Bank of America looks shaky. Will the deal still be alive by the end of the day? How tight of an acquisition contract was John Thain able to draw up in such an intense, short term period?

What news will develop from the AIG situation?

How will the markets react to the downgrade of WaMu?

Will the panic in the investment bank arena spread to the two remaining major independent players, Morgan Stanley and, the very well connected, Goldman Sachs? 

How bad will things get overnight in overseas trading?

Have a good nights sleep.

-Robert Wenzel

What Takeover?

Has Bank of America Chairman Ken Lewis come to his senses? Has the ether Merrill Chairman John Thain slipped Lewis during his sales pitch to get Lewis to buy Merrill, at a premium to the market price in the middle of a crisis, worn off?

Somebody thinks so.

Merrill Lynch shares closed today at $17.06, up all of one cent since Bank of America agreed to buy the company for stock at $29.

BTW: It's clear B of A shareholders think Lewis has lost his mind. B of A closed down 21.31% to $26.55, a drop of $7.19 on the day.

-Robert Wenzel

Executive Exits As A Business Model

Paul Kedrosky writes:

Speaking of Merrill, Dealbook over at the NYT points out something interesting. With this deal, Merrill CEO John Thain's employment contract change of control clause will be triggered, and he will exit Merrill after merely ten months on the job with $25-million in total compensation.

That's impressive enough, but it's doubly so when you consider he got packaged out of the NYSE with just shy of $20-million not quite a year ago. Apparently Thain has turned executive exits into a business model.

Actually, Thain probably deserves his exit pay more than anyone else during the current financial crisis. Merrill is supposed to be the next Lehman and somehow Thain is able to sell Merrill for $29 per share? Not only does Thain deserve the $25 million, Merrill shareholders should chip in to make a bronze statute of Thain and plant it in front of the NYSE.

NY Fed Holding Emergency Meeting On Lehman's Future

From WSJ:

In attendance are New York Fed President Timothy Geithner, Mr. Paulson and Securities and Exchange Commission Chairman Christopher Cox. The Wall Street executives included Morgan Stanley Chief Executive John Mack, Merrill Lynch Chief Executive John Thain, J.P. Morgan Chase CEO Jamie Dimon, Goldman Sachs Group CEO Lloyd Blankfein, Citigroup Inc. head Vikram Pandit and representatives from the Royal Bank of Scotland Group PLC and Bank of New York Mellon Corp., among others.

-EPJ Newsdesk