John Bougearel
Today is the tale of two story's about
BAC's health. On the one hand Bloomberg wrote today how BAC's purchase of Merrill was a "steal" based on company filings with the SEC. On the other hand, bank analyst wrote just the opposite on BAC's health last night. In fact, Whalen discredited BAC's SEC filings. And rather than being a steal, the implications of the MER and CFC acquisitions by BAC are that BAC's equity is worth zero and bondholders might have to take a 30% or more haircut next year.
Whalen's missive titled "BAC: How much should bond holders be haircut to restore solvency" last night.
In this missive, in which he disses the Lewis' BAC corp culture as a Lewis crammed down "mediocrity" he states "the departure of Ken Lewis as CEO is probably the best news for BAC equity and bond holders in many years… , a culture where competent managers where systematically forced out by the human resources department of BAC… (the) HR department ruthlessly squeezed down personnel costs. These are "process" people, after all, who believe that you can identify tasks that can be done by one person, then train that person and pay him/her well below average. This is what they call "synergies" at BAC. This goal of short-term cost cutting pervades BAC and has led to an organization that produces narrowly focused employees and business units, with no incentive to innovate or manage risk…And the same penny-wise mentality has now stripped most of the value — that is, highly skilled, experienced people — out of Countrywide and Merrill Lynch. "
Lewis made his purchases of ML and CFC before going through FDIC resolution. By buying these companies before having been restructured through the FDIC "they face the daunting task of cleaning up the mess left by the troubled acquistions" says Whalen.
"In the case of BAC, we hear that this includes buying defaulted mortgage paper at par from the various securitization vehicles sponsored by BAC directly or acquired from Countrywide and/or Merrill Lynch. The latter, in case you've forgotten, was the biggest CDO sponsor on Wall Street.
