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'Crown Jewel' Merrill Tarnishing Lewis' Rep

Publication Date: 
January 19, 2009
Source: 
Financial Week
Author: 
John Goff

Professor Kenneth E. Scott is quoted in Financial Week in a story about how Bank of America Corp's recent purchase of Merrill Lynch is dragging down B of A's stock. Financial Week writes:

On Friday, Bank of America reported that Merrill posted a stunning $15.3 billion fourth-quarter loss. The shock result at the i-bank dragged the mother ship down with it, as B of A reported a nearly $1.8 billion Q4 loss—its first quarterly loss in 17 years.

What's more, the bank reckons the Merrill purchase will reduce earnings per share for two years.

The troubles at the investment bank forced Mr. Lewis to once again go to the U.S. government, cup in hand. Before management released the dismal results, it announced that the bank had received a $20 billion cash injection from the U.S. government. That hefty sum is on top of the $25 billion of funds the bank got from the Treasury Department’s Troubled Asset Relief Plan earlier.

...

“It’s not reassuring,” said Kenneth Scott, a professor of law and business at Stanford Law School and former general counsel of the Federal Savings and Loan Insurance Corp, told Reuters. “There are more losses to be realized, but the question is the extent to which they are already reflected in values that banks are recording on their books.”