Merrill Lynch & Co: #11 Recipient of Fed’s “Secret Liquidity Lifelines”

Federal Reserve emergency lending – Merrill Lynch & Co.

Bloomberg  Nov 28, 2011

Excerpt:

Merrill Lynch & Co.‘s stock surged 30 percent after the New York-based securities firm announced an agreement to sell itself to Bank of America Corp. in September 2008. The deal didn’t stop the firm’s liquidity from shrinking by about $27 billion in three days that month, according to internal Federal Reserve Bank of New York documents. In the ensuing weeks, the firm drew as much as $62.1 billion from the Federal Reserve’s Primary Dealer Credit Facility, Term Securities Lending Facility and single-tranche open market operations. After the takeover closed on Jan. 1, 2009, Charlotte, North Carolina-based Bank of America let Merrill’s Fed loans roll off while increasing its own liquidity draws from the central bank.”

Peak amount of debt on 09/26/2008:  $62.1B

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Merrill Lynch engaged in a high-stakes leveraged speculation gambit which blew up when the subprime default wave hit and the mortgage backed securities (MBS) warehoused on their balance sheet plunged in value. They were subsequently rescued by the Fed.

Additional background information on some of the investment practices engaged in by ML over several years immediately preceding the $62.1B secret bailout:

DealBook-NYTimes reported on January 25, 2011:  “Merrill Lynch Settles S.E.C. Fraud Case”

Merrill Lynch “agreed to pay $10 million on Tuesday to settle fraud accusations by securities regulators.”

“The Securities and Exchange Commission had accused Merrill of fraud, saying that the firm misused private information from its customers to place trades on its own behalf and that the firm repeatedly charged its customers trading fees without their knowledge.”

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The Leviticus 25 Plan provides a mechanism for U.S. citizens to be granted the same access to liquidity that was provided to Merrill Lynch and numerous other global financial heavyweights at the height of the financial crisis.

 

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