With today’s flurry of financial events, I stopped to think, what’s not right about all this? And this is what I’ve come up with…
For those of you don’t know, here were the two big events of the day:
1. Bank of America bought Merrill Lynch for $44 billion.
2. No one is coming to the rescue of Lehman Brothers and it is almost certain that they will file for bankruptcy.
First up is BoA’s purchase of Merrill Lynch. Lynch’s stock closed at $17.50 Friday, but for some reason BoA is going to pay $29/share to take it
over. Why, from a business prospective, would BoA pay this incredible hike when it could have waited for Merrill to collapse and acquired it on the
cheap? The reason, in my eyes, is a very cozy relationship between the two CEOs. Merrill’s CEO John Thain was originally meant to have a “plain
vanilla” $4 million compensation package per year, including benefits. That quickly ballooned to his now known pay of over $83 million. That,
however, could rise to $120 million DEPENDING ON THE COMPANY’S STOCK PRICE. What I see here is the BoA small time investor getting royally screwed
for the sake of both CEOs’ severance packages. This amounts to nothing less than extortion and I will make a call right now that both CEOs will be
sitting in jail five years from now, but maybe not Merrill’s CEO Thain; he’s made over $300,000 of political contributions across the spectrum to
shield himself. (He also has $300 million in Goldman stock, which could prove to be interesting).
Now let’s examine the Lehman Brothers plight. No one is coming to bail them out. Foreign banks, like Barclay’s, are slowly coming to the
realization that we aren’t good for our money and are wising up to throwing good money at a broken system. Interestingly enough, not even Treasury
Secretary Paulson will bail them out. He claims he is DEAD SET AGAINST IT. Well, what about the $200 billion he just threw at Fannie Mae and Freddie
Mac a couple weeks ago? He had no problem throwing money at that. Why the quick change of heart? Either he’s completely incompetent and doesn’t
know what the hell is going on, Bush told him to stop throwing money at everything because it’s making his “conservative” administration look
blatantly socialist, even communist, or Paulson’s got a personal vendetta to see Lehman Brothers burn. After his tenure at Goldman, with Lehman as a
prime competitor, it would not surprise me one bit…
Just some food for though. Post up some comments.
(visit the link for the full news article)
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[edit on 16/1/2009 by Mirthful Me]