Deja Vu

Put Your Financial House in Order

Tags:

banking,

Charles Merrill,

John Thain,

Merrill Lynch,

New York City,

Wall Street

“Derivatives and Dangerous Times,” by Robert Lenzner, Forbes.com, Sept. 16, 2008.

When Merrill Lynch CEO John Thain entered the Federal Reserve Bank of New York building Saturday and realized that nobody was going to bail out Lehman, a chill went through him. He recognized the threat to Merrill, which is far larger in size than Lehman, and he made the most of a dire situation by grabbing onto Bank of America.

Singapore's sovereign wealth fund, Temasek, which holds 14% of Merrill shares, must be relieved, for the moment, at least. Since Merrill’s shares sell for less than $18, or a 25% discount from their value in Bank of America shares, the market is saying that the deal is by no means a sure thing. We are living in dangerous times.

"Memo," by Charles E. Merrill, 1928.

About a year and a half before the 1929 crash, Charles E. “Charlie” Merrill, founder of Merrill Lynch, sensed a hollowness within the prosperity of the Roaring Twenties. In 1928, then, the “anti-Morgan,” credited with bringing Main Street investors to Wall Street, began preaching fiduciary prudence and caution.

The advice we have given important corporations can be followed to advantage by all classes of investors. We do not urge that you sell securities indiscriminately, but we do advise, in no uncertain terms, that you lighten your obligations, or better still, pay them off entirely. Many fine reputations have been built up in this era of extraordinary prosperity, which will not stand the acid test when troublesome times are here. Take advantage of the present high prices and put your own financial house in order.

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