Journalism in the Public Interest

How Bank of America Execs Hid Losses—In Their Own Words

A suit reveals how Bank of America knew about big losses at Merrill Lynch before the companies merged but didn’t tell shareholders. 


Bank of America CEO Ken Lewis, right, and Merrill Lynch CEO John Thain at a press conference discussing Bank of America's takeover of Merrill Lynch on Sept. 15, 2008, in New York City. (Mario Tama/Getty Images)

June 7: This post has been updated and corrected.

When Bank of America announced it was buying Merrill Lynch in September 2008, bank execs told their shareholders that the merger might hurt earnings a touch. It didn't turn out that way. Losses at Merrill piled up over the next two months, before the deal even closed. Yet the execs kept painting a prettier picture to shareholders — even though it turns out they knew better.

As the New York Times detailed this morning, a brief in a new lawsuit filed in federal court in Manhattan recounts sworn testimony and internal emails in which execs admitted to giving bad information to shareholders and that they had worried about the legal ramifications of doing so.

According to the filing, Bank of America's then-CEO Kenneth Lewis admitted in a deposition that what he told shareholders about the financials of the merger was no longer accurate on the day they approved it.

We've pulled out the most revealing parts of the suit, which tell the story of how the deal went down.

On Sept. 15, 2008, Bank of America announced its agreement to buy Merrill Lynch. In the press release announcing the deal and other presentations, Bank of America said it would cause a 3 percent decrease in earnings in 2009, and that by 2010 the deal would break even or do better.

In October, concerns started to emerge about Merrill's financials. As it became clear the company was going to lose $7.5 billion that month, one exec emailed another the numbers with the message "read and weep."

Merrill kept losing money in November. Late that month, Bank of America ordered Merrill to sell off assets to try to stabilize its finances:

After current Bank of America CEO Brian Moynihan admitted in a deposition that this sale meant the deal was less valuable to shareholders:

On Dec. 1, Bank of America issued a $9 billion debt offering. Publicly, they said this was "for general corporate purposes." But private communications showed that they were trying to raise money to cover Merrill's losses:

Bank of America's then-treasurer, Jeffrey Brown, wrote in emails just before the shareholder meeting that they needed to disclose that the Merrill losses were behind the debt offering. He also testified that he told other execs they could be committing a criminal offense by not disclosing the losses:

On Dec. 5, Bank of America shareholders met to decide whether to approve the merger. They questioned Lewis about the financial impact of the deal, and he reassured them:

That day, shareholders voted to approve the merger.

In his deposition for the lawsuit, Lewis said that what he told them was not accurate. Bank of America had already revised their numbers to reflect Merrill's losses:

Just days after the deal was approved, on Dec. 12, a law firm for Bank of America prepared documents making the case that they could back out of the merger, based on Merrill's new financial woes:

On the 17th, Lewis took that argument to then Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke, who, according to the lawsuit, were stunned by Merrill's losses:

According to the suit, Lewis raised the possibility of a bailout then:

But it wasn't until January that shareholders — and the public — learned how bad things were. Bank of America stock dropped precipitously, and taxpayers ultimately padded the bank's bailout funds with an extra $20 billion to cover the losses. The SEC has actually already settled its own charges against Bank of America over misleading shareholders on the deal. The bank paid $150 million — and didn't admit any wrongdoing.

Bank of America didn't comment to the Times on the new lawsuit, and didn't immediately respond to a request for comment from us.

Update (6/7): Kenneth Lewis and Bank of America have also filed motions in the suit. Lewis' motion states that he relied on Bank of America's law firm's recommendation that disclosure of Merrill's losses was not required. Bank of America's motion asserts that the plaintiffs cannot tie the losses they claim to the non-disclosure.

Correction: This post has been corrected to show that Kenneth Lewis did not say the words “no longer accurate;” instead, it was attorneys paraphrasing his position.

Marcy Bernstein

June 4, 2012, 5:07 p.m.

So, now we know why Warren Buffett
put 5 billion dollars into this scummy
Bank of America, to prop it up.

Nice going Warren.  I wonder if we
can trust you in the future?

With all the high level criminal talent that has gravitated to the banking and investment industry in the last decades I wonder how the Mafia and the rest of our garden variety organized crime outfits are able to maintain effective executive staffs.

Mrs. Pamela Rubelmann

June 4, 2012, 6:05 p.m.

And why is it that all the players are not in jail yet?

Marion O. Sandler

June 4, 2012, 6:30 p.m.

did u miss “The bank paid $150 million — and didn’t admit any wrongdoing. “
Corp way of wriggling.

Aleta Kennedy

June 4, 2012, 6:56 p.m.

I repeat the query (which should actually be a national mantra), why is it that all the players are not in jail yet?  There are citizens serving long sentences for robberies so infinitesimal in impact when compared to the emotional and financial disasters that these snake oil salesmen have knowingly perpetrated on an international scale.  I fail to understand why anyone maintains any accounts at any of the big banks.

Facundo Tassara

June 4, 2012, 7:19 p.m.

I had a B of A credit card for several years, always carried a balance and did some balance transfers…but never a late payment…EVER. Out of the blue I get a call after i had paid the card off…a few thousand bucks…and was told that they were closing my card….after that the guy on the phone says “should you consider to open a B of A card or account with us in the future please check back.” I kindly let him know that he can make a giant note on my account that “I WILL MOST CERTAINLY NEVER DO BUSINESS AGAIN WITH B OF A.” I guess i didn’t pay them enough fees to be considered a good customer….I

All these are happening because of too many clauses in our North-American over-done law books and failure of our ‘out of date’- judicial system.

Stephen Hines

June 4, 2012, 11:26 p.m.

Those bankers - they’re just great big kids, really.  Couldn’t you just hug one?


Early in the “Move Your Money” campaign a few years ago, I started the process to open a new bank account with a non-profit credit union. About a month after that account was securely set up with auto-deposits, bill payer, credit cards, et al, I made it my personal journey to enter the lobby of my local B of A branch to close out my long-standing account, and walk away with my remaining balance in the form of a cashiers check.

Waaay more fun than having the transfer done electronically, since the managers were immediately called in to intervene. As they tried to ask questions and then began offering enticements to stay with them, I was then FINALLY able to clearly and politely tell the managers WHY I made the decision to stop doing business with them. Ultimately, I’m sure no hearts and minds were changed at B of A, but it was a satisfying moment for me.

Also, I love my new bank. It’s no surprise to anyone that they along with other non profits across the nation have surged in membership growth during the past few years.

Richard McGinnis

June 5, 2012, 6:39 a.m.

FloridaI   $334,100,000   17.88%    $0   $33,400,000   $300,700,000   $0

Fraud on top of fraud and still no prosecutions and Obama still says they did no wrong.


Wachtell lipton the big NYC law firm should be charged for advising not to tell shareholders,they claimed the info was non material.

The bottom line - the only thing that is meaningful - is the 1% and their political pawns, the Republicans and neoliberal Democrats, aren’t “just” willing to sacrifice “the general Welfare” of the American people and the safety and security of the United States of America in their pursuit of wealth.

That is what they do, over and over and over again.

No fair quoting them in context!

Actually, I think the real question isn’t whether BoA knew the details (well, it’s a question), but who else knew.  This isn’t something easily done in the shadows, and a lot of people stood to benefit knowing this information in advance.

This could be a much larger story than we think.

I have the distinct feeling that inserting this into the timeline of what else was going on would be illucidating.  Paulson knew. Lews went to Paulson for TARP money for bailing out Merrill losses, for thing. Then somewhat later he went back to the trough for MORE, explaining that they just “really didn’t know” how bad off Merrill actually was. The BofA purchase of Merrill was part of the overall plan to “save the economy” by saving the criminal financial institutions.

Ken Lewis sat across from Bill Moyers, sometime in 2009, and BRAGGED about being the “acquisitions CEO.”  He was that. He was at NationsBank, Charlotte, and “acquired” Bank of America. Given that the name was even more “red, white, and blue” than NationsBank, the BofA “brand” was adopted.

This article is important—a piece of the puzzle, if you will. Compare it with the 4-part Frontline series—make a note of dates. The entire 2008 “failure” along with the shennagans that followed are probably the largest con ever committed. Ken Lewis should probably be behind bars—and many others. They got caught in their own trap, in their own lies, and what they did to get out of it is absolutely phenomenal.

And right now it is about to happen all over again. Can’t wait until the Republican congress starts figuring out how to “pay for” the next big bailouts.

@Elizabeth -  can only agree with your suspicions.  Looking at “the big picture” makes your conclusion inescapable.

This has been a clear trend since the Bush years. The political class and those connected to them, can commit crimes and suffer no consequences - unless they cheat others of the political class (Madoff, for example). Meanwhile, whistleblowers and those without political clout are punished harshly for any misdeeds. Clinton made the mistake when he took office - never pursued any of the crooks in the Bush I admin. All of those bad birds came home to roost with Bush II and forced the fake war in Iraq on all of us, while making Cheney and his cronies, billionaires. Then Obama came into office and said he wasn’t interested in the past. So all the liars and crooks of Bush II are free to do it all over again. Same thing with the CIA torturers. Evidence is destroyed - the judicial branch turns the other cheek. The Supreme Court Radical RIght 5 continue to block lawsuits against any government figure, even secret service agents. And the police state created in the past decade attacks and pepper sprays their fellow citizens simply for protesting this sad state of affairs in our country. The right to assemble and protest has been almost destroyed. Obama is bad and Willard Romney is worse. And soon every state will have a Scott Walker as its governor, gutting middle classes and sending tax money into the pockets of corporate supporters.

Sheesh…@BA:  Clinton didn’t “make a mistake”...he plays for their team.

If the fact that Clinton signed off on “Don’t ask, don’t tell.”, the Defense of Marriage Act, deregulation, and championed inequitable free trade and so drove the consequential job losses won’t convince you, consider what Clinton said to Maria Bartiromo on CNBC today (

“I think we could get a quicker recovery if we could reform the corporate tax laws, lower the rates, broaden the base, and offer the corporations a chance to bring the money back free now if they would invest at least a portion of it in the infrastructure back where they get a very good return on investment, very good. And then we could put the American people to work.”

End quote.  That is the extreme right’s agenda up and down the line!

I’ve been an object of scorn on more than one occasion for making the attempt to persuade people that there is no effective difference between a Republican and a neoliberal Democrat like Clinton. 

If it walks like a duck, swims like a duck, and quacks like a duck…

Time for the guillotine?.........

Oh, don’t say that, Sierra…the faintest hint of the French Revolution, and Ann Coulter starts going off like somebody put BENGAY® in her feminine hygiene products.

And those folks do troll the Internet’s comment boards looking for “proof” of “liberal” intent that they can use to inflame their base.

Imagine Bank of America lying.  I’ll be!  That means that they’ll have high posts in the White House come Obama’s next term.

Way to obliterate the propaganda value of your chosen screen name, “Honest Hal”!!!!

Juan R Bellavista

June 5, 2012, 7:09 p.m.

There was a smart man who told me long ago that business ethics is only an excusss for wrongdoers. Rigtheousness and honesty exist by itself. I didn’t understood him until now. I had seen many cases of dishonesty and premeditated wrongdoing based on greed, envy and egocentrism. All of these people must be held fully accountable. Their actions affects us all in all aspects of life, economically, socially and spiritually. Full accountability must be enforced, in order to halt the advance of greed and wrongdoing in our life’s, country and world.

This article is part of an ongoing investigation:
The Wall Street Money Machine

The Wall Street Money Machine

Enticed by profits and bonuses, Wall Street took advantage of complicated mortgage-based instruments to reap billions, only to exacerbate the eventual crash.

The Story So Far

As the housing market started to fade, bankers and hedge funds scrambled for ways to maintain the lavish bonuses and profits they had become so accustomed to, repackaging mortgages in complex securities called collateralized debt obligations. The booming CDO market masked how weak the housing market was, and exacerbated its collapse.

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