Merrill Lynch Is Finally Put to Rest by Bank of America

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Five years ago, Bank of America acquired Merrill Lynch, the nearly 100-year-old investment banking franchise. But it wasn't until today that Merrill Lynch officially ceased to exist.

In a press release issued this morning, the nation's second largest bank by assets announced that, as of Oct. 1, it has completed the merger of Merrill Lynch.

On the surface, the move means very little to the average investor or customer of either company. Merrill Lynch will continue to operate under the same name and brand. And Bank of America's primary broker-dealer, Merrill Lynch, Pierce, Fenner & Smith, will continue to do so as well.

But digging below the surface, it's more significant.

The consummation of the merger means Bank of America has formally assumed all of Merrill Lynch's obligations, "including its outstanding U.S. and non-U.S. debt securities, its obligations regarding outstanding trust-preferred securities, and its guarantees of both outstanding non-U.S. debt securities issued by its subsidiaries and trading contracts of its subsidiaries."

It also means Merrill Lynch will no longer have to file separate reports with the Securities and Exchange Commission.

One thing it doesn't do, however, is answer the numerous questions that have been raised since the deal was inked over that fateful weekend in September of 2008.

Why did Bank of America pay so much? Had it waited one more day, it could have had a sweetheart deal like JPMorgan Chase did in its acquisition of Bear Stearns. Instead, Bank of America paid $29 a share even though Merrill's co-president Greg Fleming had been advised by a colleague to prepare for an offer of just $3 per share.

Why did the bank fire its general counsel immediately after he uncovered the extent of Merrill's losses? The decision -- or, rather, the bank's failure to adequately disclose the losses to shareholders -- subsequently prompted a lawsuit, costing the bank more than $2 billion to settle.

But despite these questions, there's little doubt that the acquisition has ultimately played out in Bank of America's favor. "Without Merrill's contribution," I said here, "Bank of America would have recorded a net operating loss over the last five years of somewhere in the range of $29 billion as opposed to the $11 billion in profit it notched instead."

If nothing else, moreover, today's announcement is yet one more milestone between Bank of America and the financial crisis that brought the megabank to its knees.

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