Merrill Lynch, your savings and politics

Well, Merrill Lynch, the very symbol of Wall Street’s bulls, got eaten yesterday by the bear market. And by its own pathetic management. Something tells me that the losers here — as at Lehman Brothers — will be employees and those of us who entrusted our savings and retirement accounts to the so-called financial experts. So it goes.

Here’s one communication angle on all of this. I learned last night via Twitter that Bank of America was negotiating to buy Merrill Lynch. Later last night the Wall Street Journal sent me an alert on my Blackberry that the deal was done — for $50 billion. And oh by the way. While this was going on, the meltdown of Lehman Brothers became complete, with the firm heading for bankruptcy after the federal government refused a bailout. I guess Lehman Brothers didn’t warrant the same treatment as Freddie and Fannie and the late, great Bear Stearns. New media — old problems.

Here’s the short take, from USA Today:

Rising mortgage defaults amid the collapse of the housing bubble left many financial firms holding billions in investments backed by bad loans. Merrill Lynch, AIG (AIG) and Lehman are just the latest victims of the credit crunch, which has also clobbered mortgage giants Fannie Mae (FNM) and Freddie Mac (FRE), subprime lenders IndyMac Bank and Countrywide Financial, and investment bank Bear Stearns.

This is all kind of scary — and sad. For one, thousands of people are losing jobs and homes because of this. And many people, including me, reply on Wall Street now for a large chunk of our retirement savings. And the debacle in housing is pretty well documented now. Although something tells me that the crisis in home loans is far from over. Look out below.

So here’s a second communication angle. When do you think I (and thousands of others) will hear anything directly from Merrill Lynch? I’m sure that my wealth-creation adviser at Merrill will have bigger fish to fry today than to call me. I almost never hear from him during downturns on Wall Street in any event. And I imagine he’ll be checking his own retirement account this morning, most of which is most likely heavily invested in Merrill Lynch stock. Well Mr. Adviser. You’re a long-term investor now just like the rest of us. Won’t even charge him for that advice.

But how about Merrill Lynch’s public relations staff? Surely they got the Twitter message last night at the same time I did. I checked the Merrill Lynch investment website at 4 a.m. Nothing. Then checked back at 8 a.m. and here’s the first part of the news release:

Bank of America Buys Merrill Lynch Creating Unique Financial Services Firm

Combines leading global wealth management, capital markets and advisory company with largest consumer and corporate bank in U.S.

CHARLOTTE — Bank of America Corporation today announced it has agreed to acquire Merrill Lynch & Co., Inc. in a $50 billion all-stock transaction that creates a company unrivalled in its breadth of financial services and global reach.

“Acquiring one of the premier wealth management, capital markets, and advisory companies is a great opportunity for our shareholders,” Bank of America Chairman and Chief Executive Officer Ken Lewis said. “Together, our companies are more valuable because of the synergies in our businesses.”

“Merrill Lynch is a great global franchise and I look forward to working with Ken Lewis and our senior management teams to create what will be the leading financial institution in the world with the combination of these two firms,” said John Thain, chairman and CEO of Merrill Lynch.

Typical corporate BS. And as an investor, sure doesn’t make me feel much better. Fact is that Merrill had to do something before it ended up like Lehman Brothers and Bear Stearns. As reported in The Wall Street Journal online this morning (by subscription only) Merrill is being sold at “about two-thirds of its value of one year ago and half its all-time peak value of early 2007.”

But more importantly, to employees and investors, the stock price of both Merrill and Lehman Brothers has been in a free fall. Merrill Lynch common stock closed Friday at $17.05, down from its 52-week high of $78.66. Lehman Brothers common stock closed Friday at $3.65, down from its 52-week high of $67.73.

Good luck to employees at those two companies — and thousands of others on Wall Street — who are sitting back and watching their jobs, savings and retirement accounts evaporate. And good luck to the rest of us. Because even if the Bush administration doesn’t want to admit it, the U.S. economy is in deep doo-doo.

And maybe the events on Wall Street this weekend will be the spark that gets the presidential candidates back to considering some of the important issues facing us in this country. Here’s from a Politico article, “Bank meltdown wallops campaigns“:

America’s banking instability could upend the final 50 days of the presidential campaign, with both candidates forced to confront a calamity that has gotten only glancing attention during the first 20 months of the race for the White House.

Red flags about the nation’s economic infrastructure have been popping up at least since the collapse in March of the investment bank Bear Stearns. But neither Sen. John McCain (R-Ariz.) nor Sen. Barack Obama (D-Ill.) has talked in detail about the potential consequences for voters and the government.

Until now, the crisis seemed like a confusing Wall Street story. That all ended with the fast-moving events of Sunday, which The New York Times called “one of the most extraordinary days in Wall Street’s history.” A CNBC special report on Sunday night called it “a complete realignment of Wall Street.”

And that was before the extraordinary 9:30 p.m. announcement by the Federal Reserve of new efforts to shore up markets.

So it’s no longer an insider’s game. The crisis is now at a tipping point where Wall Street will visibly affect Main Street: Home buyers, consumers and entrepreneurs will have even more trouble getting credit, slowing the nation’s job machinery.

We heard this before; it’s worth repeating.

“It’s the economy, stupid.”


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