Only this was no gag. The caller was telling a banker in Chicago that none other than Mr. Buffett wanted to reach the chief executive of Bank of America, ASAP.
The hurried deal that emerged from that early-morning call in late August underscored Bank of America’s predicament: It was the too-big-to-fail bank that, to some, also seemed too big to succeed.
Its C.E.O., Brian T. Moynihan, has been struggling to fix things for almost two years. After the financial markets turned on the company this summer, Mr. Buffett invested $5 billion, arresting a precipitous decline in Bank of America’s share price.
But not even the imprimatur of the Oracle of Omaha has been enough to dispel the clouds. Despite the billions from Mr. Buffett, and tens of billions in asset sales, Bank of America can’t seem to find its way.
The situation has set teeth on edge at its headquarters in Charlotte, N.C. But perhaps nowhere is the grumbling louder than in Midtown Manhattan, at One Bryant Park, now the base of the Wall Street bank formerly known as just Merrill Lynch.
When Merrill collapsed into the arms of Bank of America in late 2008, the deal remade the face of Wall Street. Merrill, with its “Thundering Herd” of rough-and-tumble stockbrokers, was now reporting to more formal Southern bankers in Charlotte. No sooner was the deal done than gaping losses at Merrill threatened to drag down Bank of America. Washington stepped in with the second of two federal bailouts.
Nearly three years later, taxpayers have been repaid, with interest, and what is now Bank of America Merrill Lynch is doing surprisingly well. But the company as a whole is groaning under the weight of many billions of dollars in bad home mortgages, most of them inherited from Countrywide Financial, which it acquired in 2008.
Bank of America’s stock, down 54 percent this year, is the biggest loser in the Dow Jones industrial average.
The irony is not lost on bankers, brokers and traders at One Bryant Park. The billions of dollars that Bank of America Merrill Lynch is earning from its businesses on Wall Street are being wiped out by the red ink flowing out of Countrywide. Bonuses are on the line. So are jobs.
“It’s debilitating and depressing,” says one Merrill veteran, who insisted on anonymity because he was not authorized to speak publicly. “People are very angry. How could we not be?”
Many Americans who don’t work in the financial industry — people who are struggling to make ends meet, or to find jobs, or to keep them — are more than angry. But this is Wall Street, where money is the measure and where, even in this post-bailout era, top producers expect to be paid, and paid well.
In hindsight, many agree that Mr. Moynihan’s predecessor, Kenneth D. Lewis, paid too much for Merrill Lynch: $50 billion in stock. The outcry over the deal and subsequent bailout led to investigations by state and federal regulators. A lawsuit brought by Bank of America shareholders contends that Bank of America tried to keep the losses at Merrill quiet, and seeks $50 billion in damages.
So it might come as a surprise that Bank of America Merrill Lynch is actually thriving. Measured by fees collected for Wall Street work, it is second only to JPMorgan Chase and well ahead of Goldman Sachs and Morgan Stanley.
The global banking and markets unit of Bank of America, which includes many of the operations it acquired in the Merrill merger, earned $3.7 billion in the first half of 2011. With help from the Thundering Herd, the bank’s assets under management have increased to $2.2 trillion from $2 trillion in the last year, despite the turbulence in the financial markets.
AT One Bryant Park, all of this comes as cold comfort.
Many bankers and traders typically receive at least half of their pay in the form of restricted stock. In recent years, Bank of America has made such awards when its share price was trading upwards of $14. With the price now at $6.12, anyone who got shares has essentially suffered a big pay cut since they were handed out, mostly because of the problems associated with Countrywide, the subprime lender whose excesses came to symbolize the housing bubble.
Executives at Bank of America Merrill Lynch concede that they have a big mountain to climb.
Article source: http://feeds.nytimes.com/click.phdo?i=89bb93cdb0d61fba64794aaf1a7464e5