FRB: Press Release--Treasury, Federal Reserve, and the FDIC provide assistance to Bank of America--January 15, 2009
The above link provides the best description of the details in its "Term Sheet" PDF link. See also,WSJ.com MarketWatch NYTimes.com
A lot of Merrill's toxic assets were derivatives with a maximum loss potential of 81 billion. Those derivatives reference residential and commercial mortgage pools and corporate debt, plus assorted hedges.
If you want to start the day in an irritable mood, please read this NYT article about Merrill's compensation paid to the people who destroyed it. NYTimes.com
Before reading that article, I had previously read others that anyone at Merrill who tried to stop the train wreck was pushed out.
The CPI fell .7% last month. Yahoo! Finance This will have an adverse impact on the floaters, like OSM, that tie interest payments to CPI.
This establishes beyond any reasonable doubt, to me at least, that the Merrill acquisition was a catastrophic mistake and the BAC shareholders were not told material information before voting on the acquisition. I did vote against it. I am sure many mutual funds would have voted for it notwithstanding this recently disclosed material information. I think that some lawsuits will soon be filed against BAC on this transaction. These revelations further show that Stan did in fact run Merrill into the ground. An honest appraisal of its net worth before the BAC acquisition, assuming no government assistance, would have been zero.
While BAC may rally today or the next day, I view the stock to be at best dead money for a year or two. I may consider adding to my position no sooner than the middle of 2010 and only if I could buy 100 shares then at less than the current price. Remember that Citigroup rallied after the announcement of its bailout by the government only to fall back to its low in a few weeks. I see no hope for existing BAC shareholders for the foreseeable future. An optimist may see a ray of light at the end of the tunnel sometime in 2010.
A lot of mutual funds, ETFs and closed end funds whose objective is to hold high dividend paying companies have large positions in BAC. Since financials had been a source of dividends, many of those funds are heavily exposed to financial stocks, particularly banks, that have been slashing their dividends. This is a list of some of the ETFs that focus on dividend stocks and each one has to be assessed separately on their exposure to bank stocks.High-Dividend ETFs - Complete ETF List The SSGA sponsor of ETFs changed its web address, made the overall presentation worse, and the pages now load very slow. SPDRs - View AllIt is the sponsor for BWX, WIP and TFI, bond ETFs, that I own and it has one of the main dividend ETFs which I do not own. I do not own these dividend ETFs due to their exposure to financial stocks. This is the new link to its SDY product SPDR S&P Dividend ETF
This site from SSGA is very unfriendly to IMAC users. It is probably best viewed using a Windows operating system with internet explorer, and some pages will not load at all using an IMAC with either the safari of firefox browsers (even if you turn off the pop-up window blocking).
Citigroup reported its fifth consecutive loss losing 8.29 billion in the 4th quarter, and will split itself into two operations. NYTimes.com
As I have said, if I go totally off my rocker, and let the wild and crazy guy go off the reservation, I might venture into Citi by buying 50 south of 2. If the sensible part of me is asleep, then I might even move that target up to 3. Otherwise, even the wild and crazy guy will let it pass.
A good description of the House Democrats 825 billion stimulus bill can be found at WSJ.com