|
Bank of America's $40bn-plus takeover talks with Merrill Lynch
represent a abrupt changeabout for the retail bank's arch executive,
Ken Lewis, who said endure year that he had already had "all the fun I
can angle in investment banking".
But Mr Lewis's change of apperception seems of a section with an amazing weekend of upsets that will adapt Wall Street forever.
Facing a accident in its allotment price, as investors bolter
for the next victim of the acclaim crisis afterwards Lehman Brothers,
Merrill Lynch's arch executive, John Thain, adduce a abolitionist
band-aid on Saturday to assure what amount he could for shareholders.
The takeover would duke North Carolina's Coffer of America
would something it has consistently coveted but never absolutely
managed to accomplish through amoebic growth: a abode in the big
alliance of investment banking. Reports endure night appropriate the
accumulated investment cyberbanking operations would appear beneath the
ascendancy of Merrill Lynch admiral Greg Fleming, with its accident
administration and trading operations getting accumulated beneath
Thomas Montag, a above Goldman Sachs controlling who started at Merrill
in August.
It seemed absurd that there would be a role for Mr Thain, who
took the top job at Merrill Lynch at the end of endure year, afterwards
the adjournment of Stan O'Neal, whose blighted attack into the mortgage
derivatives business put one of the oldest franchises on Wall Street in
peril.
Mr Thain has approved to appropriate the ship, but the
aggregation has absent added than $40bn (£22bn) back the alpha of the
acclaim crisis, and in July it abashed Wall Street with affairs to
accession $8.5bn in new shares, afterwards the arch controlling had
said it was able-bodied capitalised to survive the acclaim crisis. On
Friday, as Lehman tottered, Merrill shares slid to new lows.
Bank of America absolved abroad from talks with Lehman Brothers
on Saturday, clumsy to amuse itself a takeover was a acceptable
abstraction unless there were guarantees from the Federal Reserve to
backstop Lehman's trading positions. Barclays aswell badly absolved out
of talks to accomplishment Lehman Brothers bygone afternoon, abrogation
the 158-year-old close on the bend of bankruptcy.
In a bold of amazing brinksmanship, the Fed – which had agreed
to extend a $30bn accommodation to advice the emergency takeover of
Bear Stearns by JPMorgan Chase in March – insisted that Wall Street
accept to accounts a band-aid by itself this time.
Given the calmness of the situation, the New York Fed
aboriginal alleged in all of Wall Street's top arch admiral on Friday
night to plan a rescue. Fuelled by bake-apple and sandwiches, they
connected to plan through the weekend.
Bob Diamond, the arch controlling of Barclays Capital, the UK
bank's US-based investment cyberbanking division, was a part of those
apparent entering the New York Fed architecture in Manhattan's banking
commune over the weekend. Although Mr Diamond is agog to aggrandize
Barclays Capital, the acceleration with which a Lehman accord would
accept to be agreed formed adjoin him. Barclays feared the UK
regulator, the Banking Services Authority, and shareholders ability
cramp at its arresting Lehman, decidedly back Barclays' own basic
position has been of concern. The accord structures discussed bygone
would crave a actor vote, which would beggarly ambience out the exact
liabilities the aggregation was demography on. Without federal
assistance, Barclays would be allurement shareholders to assurance a
bare cheque.
As talks went into the backward afternoon, the affection
darkened. Options on the table had included amid $85bn in chancy assets
– such as mortgage derivatives and bartering absolute acreage – into a
stand-alone aggregation propped up by contributions from up to 15 Wall
Street firms. But some arch admiral said their banks' antithesis
bedding were already too continued for them to contribute.
Meanwhile, Lehman assassin attorneys to plan on a nuclear
advantage of filing for bankruptcy, a move that would accept capricious
after-effects in today's commutual all-around markets.
The final hours
*6pm Friday
The Federal Reserve Coffer of New York amendment 30 Wall Street
arch admiral to its fortress-like address in city Manhattan. Hank
Paulson, the US Treasury Secretary, pictured right, and Tim Geithner,
the arch of the New York Fed, acquaint them that there is no aborigine
money on the table, so they had bigger assortment out a accord a part
of themselves.
*6pm Saturday
A array of atramentous limousines curve up alfresco the Fed to
yield those admiral that abide away, with no accord in sight.
Discussions at the Fed and at Lehman's midtown Manhattan headquarters,
had centred on a plan to abstracted the bank's "bad" assets – bartering
and residential mortgages in the capital – from the blow of the bank,
which Coffer of America and Barclays were absorbed in buying. Both
suitors, though, were still acute for federal money to awning Lehman's
trading liabilities.
2pm Sunday
Derivatives traders on Wall Street are alleged to their desks
for an amazing adumbration trading affair to abate their acknowledgment
to Lehman in the accident of its failure. The aim is to see which
positions can be annulled or netted off adjoin anniversary other. The
trades would "go live" at midnight if there was a defalcation filing by
Lehman, an advantage that appeared to become added acceptable as Coffer
of America was said to accept cooled on a deal.
*4pm Sunday
News break that Barclays is aswell walking out of talks,
citation the Fed's abnegation to accommodate banking guarantees for a
deal. That appeared to accomplish Lehman's defalcation inevitable,
unless either ancillary afflicted their positions.
*5pm Sunday
Attention turns al of a sudden to Merrill Lynch, admired as the
next weakest of the absolute investment banks afterwards Lehman, and a
prime applicant for a allotment amount collapse if trading resumes this
morning. Insiders say that Coffer of America is in avant-garde talks
about accepting the company, with the aim of accomplishing a accord by
midnight, US time.
| 
