How to Cover Wall Street

The American auto industry is like a lame horse: The only way to fix it is to let it die.

GM announced on Friday that the company will close 20 of its North American plants and is considering filing for Chapter 11. Chrysler LLC is slated to close 29 plants and lay off 53,000 workers effective immediately. And, though Ford Motor Company CEO Allan Mullaly told a Congressional committee that his company does not face what he called “near-term liquidity issues” which have slammed GM and Chrysler, he still has his cap in hand for $9 billion of Treasury-sponsored credit, should the industry worsen.

(more…)

So, Lloyd Blankfein has decided that Goldman Sachs’ top management will forgo their yearly bonuses this year, bringing the “will they or won’t they” argument to a close. Now the others are expected to follow suit.

Smooth move, Lloyd: Please Washington by taking a hit at the top; let the “little people” take home their bonuses; and Wall Street and Main Street are finally reconciled.

Goldman’s “goodwill” move has prompted executives at UK-based, Barclays, PLC, Germany’s Deutschbank AG and Switzerland’s UBS AG to abandon bonuses for senior managers. But executives at Morgan Stanley, Citigroup and AIG aren’t lining up to fall on their swords. In fact, John Mack and Brady Dougan are conspicuously silent on the matter while Vikram Pandit has decided to eliminate the bonus question altogether by slashing jobs.

(more…)

Treasury Secretary, Henry Paulson, is trying to save the financial system. But the Treasury’s Troubled Asset Relief Program or TARP cannot fund all of the financial institutions that have applied for it.

Regulators for the Treasury have announced that the agency expects at least 1,800 publicly-held financial institutions to line up for their piece of the $700 billion bailout designed to rid banks of toxic assets.

Paulson moved quickly to shore up the financial services sector in the midst of a meltdown. And, to date, Treasury plans to divide $33 billion  among the nine largest US banks and 16 regional banks. But the Treasury Secretary may have opened up a Pandora’s box since, now, almost any financial institution can apply for a piece of the pie.

(more…)

Merrill Lynch brokers are looking for the door.

Acquisitions are all about “give-and-take.” But it looks like Bank of America CEO, Kenneth Lewis, is going to have to give much more to Merrill Lynch brokers in order to keep them from defecting.

In an effort to keep Merrill’s 16,850-person brokerage unit intact, Lewis announced that brokers who do $1 million in business will receive bonuses equal to 100 percent of their yearly fees and commissions. The caveat? Those brokers will have to remain at Bank of America for the next seven years before they can collect.

Sure, Kenneth. Hundreds of high-rolling brokers are going to hang around Merrill Lynch for seven years just to validate your decision to purchase the brokerage. Like that’s going to happen.

Lewis’ decision to green-light these long-term bonus arrangements amounts to re-purchasing the one Merrill asset that made the $50 billion Bank of America deal worthwhile. But, with Merrill’s stock price down 76.06 percent from last year and bonus expectations down 30 to 50 percent from last year, top brokers are finding that they can make more elsewhere or on their own.

On Friday, four of Merrill’s elite — Bill Loftus, Bill Lomus, Kevin Burns and Jim Pratt-Heaney — broke away from the 16,850-person brokerage network to form LLBH Group Private Wealth Management. Others are actively being lured away by competitors such as Citibank, MorganStanley and UBS, some of which are offering bonuses in excess of 200 percent of fees and commissions.

Bank of America’s gamble may stave off a mass exodus from Merrill. But who really wants to trade their A-list brokers for a bunch of mediocre desk jockeys who would rather stay put than go after the big fish?

Top brokers will most certainly take their clients with them. Now Lewis has to start negotiating with his brokers to sweeten the deal or let them walk. Either way, BOA’s shareholders are going to lose money on the Merrill acquisition. And Lewis may, ultimately, find himself out of a job.

Antitrust regulators at the US Justice Department signed off on Bank of America’s $34.9 billion dollar acquisition of Merrill Lynch & Co. this morning. But there was little to celebrate as Merrill announced a $7.5 billion-dollar loss in the third quarter, the fifth straight loss since the fourth quarter of 2007.

Though Merrill has retains its cache as the world’s largest brokerage, a laundry list of that firm’s losses suggest that Bank of America’s  “golden egg” may, in fact, be a lemon. The big question is whether or not Bank of America will demand that Treasury guarantee its investment in Merrill in order to keep the purchase on track.

(more…)