The Atlantic has run an article on the last days of Merrill Lynch, and the coercive influence of the Fed and the Treasury. It asks the question, "Did the deal save us all from economic apocalypse?". Let's review deal terms. BoA offered $29 a share - a 70% premium over the previous Friday close, and nearly 2x book value. Andrew Cuomo, NY Attorney General (chief legal office in NY state, which borders with Quebec and Ontario in Canada, and dominated by the Great Appalachian Valley in the East), brought many of the facts to light regarding the Fed and Treasury trying to keep the firms together, once Merrill's losses became evident. They were collateralising loans with bad assets. By November, it emerged Merrill had $9bn in losses. Should Ken Lewis at this stage have invoked the MAC (material adverse change clause) to allow his banking Wal-Mart to walk away from the deal before it closed? It was now Washington versus Wall Street.
On December 5 2008, shareholders approved the deal. Prior to this, no information was revealed on the exact extent of Merrill Lynch's problems. According to Lewis, Paulson threatened to remove the board and management of Bank of America should Lewis invoke the MAC, as it would sink Merrill Lynch and create a "systemic risk" to the US economy. The flip side - shareholder litigation for not invoking the MAC.
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