Merrill Lynch was founded in 1914 and heralded the idea that everyone, not just the rich,

should invest in the financial markets. That stance made Merrill not only one of the pillars of Wall Street, but a reputation as the stockbroker for Main Street as well. It survived wars and the Great Depression, but succumbed as an independent company to the mortgage meltdown that began in mid-2007. On Sept. 14, 2008, Merrill announced that it had agreed to be purchased by Bank of America, rather than run the risk of being pulled under by turmoil surrounding the industry, as Bear Stearns and Lehman Brothers had been.

Merrill's logo -- a bull -- had long symbolized the fundamental optimism of Wall Street, and its leaders had often been viewed as spokesman for the entire industry.

In recent years, Merrill had grown to be really two companies.

One was a thriving WEALTH-MANAGEMENT COMPANY with $1.4 trillion of assets managed by 16,000 brokers plus a 49 percent interest in BLACKROCK, a fast-growing asset management operation.

The other part was a fixed-income or bond-trading operation that invested heavily in relatively high-risk, high-return securities backed by subprime home mortgages. These securities lost value as housing prices fell and the number of foreclosures grew. In late October 2007, the company posted a write-down of $8.4 billion to recognize the decline in value of these securities. Shortly thereafter, E. Stanley O'Neal was removed as chief executive as a result of the losses and an unauthorized merger proposal. On Nov. 14, John A. Thain, the chief executive of the New York Stock Exchange and a former president of Goldman Sachs, was named as Mr. O'Neal's successor. Mr. Thain moved quickly to push more of the worst investment out the door, writing off billions while moving to raise more capital. In July 2008 he sold $31 billion of securities for pennies on the dollar, asserting that Merrill needed to get the housing crisis behind it. Mr. Thain's actions were the most drastic of any of the chiefs of the major Wall Street banks, and as late as Sept. 10 he reassured worried employees that the firm's capital levels were sound. But as Lehman Brothers started to swirl downward toward bankruptcy -- a prospect that held the risk of pulling other firms down with it -- Mr. Thain became convinced that a far more drastic action was needed. When Treasury Secretary Henry M. Paulson Jr. called top bankers together on Friday, Sept. 12, for weekend-long talks on saving Lehman, Mr. Thain began discussions with the chief of Bank of America, Kenneth D. Lewis. By Sunday, they were ready with an announcement that rattled some on Wall Street even more than the news of Lehman's bankruptcy: the end of Merrill as an independent firm.

Merrill Lynch, London

The trading floor environment is an extremely hectic one with Merrill Lynch employees often spending long hours at their desk. This makes it paramount for a traders desk to be ergonomically designed and for information to be viewed easily on trading floor screens.

History
1907: CHARLES MERRILL arrives in New York to work for a textile company. He meets Edmund Lynch, who is looking for someone to share his boarding-house room at the 23rd Street YMCA. Both men were born in 1885. 1914: Charles E Merrill & Co opens its doors in January. Lynch joins him, and in May they open an office at 7 Wall Street in downtown Manhattan.

1915: The firm changes its name to Merrill, Lynch & Co. An associate notices a difference between the partners: "Merrill could imagine the possibilities; Lynch imagined what might go wrong in a malevolent world." 1938: Edmund Lynch dies. Merrill Lynch drops the comma from its name. 1956: Merrill helps take Ford Motor Co public, giving the firm its first billion-dollar year in underwriting. The same year, Charles Merrill dies.

1958: Firm changes its name to MERRILL LYNCH, PIERCE, FENNER & BEANE.

1960: Merrill opens its first London office. Four years later, it opens its first Tokyo office. 1964: Merrill buys C.J. Devine, becoming a dealer in fixed-income securities. 1971: Merrill goes public and lists on the New York Stock Exchange. 1976: Merrill creates Merrill Lynch Asset Management. 1999: Merrill is world's largest underwriter of stocks and bonds for the last time, a title it cedes the next year to Citigroup Inc.
2001: Most of Merrill's 9,000 Wall Street employees evacuate their offices opposite the World Trade Center during the 9/11 attacks. Three die.

Dec 2002: Merrill reaches $100 million settlement with New York Attorney General Eliot Spitzer over alleged conflicts of interest by research analysts. The same month, it names Stanley O'Neal chief executive. He becomes chairman in April 2003. 2006: Merrill adds billions of dollars of mortgages to its balance sheet.

It acquires FIRST FRANKLIN FINANCIAL CORP, a subprime mortgage lender owned by National City Corp. Oct 2007: Merrill ousts Stanley O'Neal as chairman and chief executive as mortgage losses begin to mount, and after O'Neal approaches Wachovia Corp about a merger without telling the board. John Thain, chief executive of NYSE Euronext, is named his replacement as of Dec 1.

2008: Losses top $19.2 billion in the year ended June 30, as credit losses $40 billion. Merrill scrambles to raise capital from sovereign wealth funds and other investors, and sell risky assets.

Sept 15, 2008: Merrill agrees to be acquired by Bank of America for $29 per share.

Rise to prominence
Merrill Lynch rose to prominence on the strength of its brokerage network (15,000+ as of 2006), sometimes referred to as the "thundering herd", that allowed it to place securities it underwrote directly. In contrast, many established Wall Street firms, such as Morgan Stanley, relied on groups of independent brokers for placement of the securities they underwrote. Until as late as 1970, it was known as the "Catholic" firm of Wall Street. The firm went public in 1971 and became a multinational corporation with over US $1.8 trillion in client assets, operating in more than 40 countries around the world. In 1977, the company introduced its Cash Management Account (CMA), which enabled customers to sweep all their cash into a money market mutual fund, and included check-writing capabilities and a credit card. Fortune magazine called it "the most important financial innovation in years." In 1978, it significantly buttressed its securities underwriting business by acquiring White Weld & Co., a small but prestigious old-line investment bank. Merrill Lynch was well known for its Global Private Client services and its strong sales force.

Sale to Bank of America

Significant losses were attributed to the drop in value of its large and unhedged mortgage portfolio in the form of Collateralized Debt Obligations. Trading partners' loss of confidence in Merrill Lynch's solvency and ability to refinance short-term debt ultimately led to its sale. During the week of September 8, 2008, Lehman Brothers came under severe liquidity pressures, with its survival in question. If Lehman Brothers failed, investors were afraid that the contagion could spread to the other surviving investment banks. [Lehman Brothers filed bankruptcy on September 15, 2008, after government officials could not find a merger partner for it.] On Sunday, September 14, 2008, Bank of America announced it was in talks to purchase Merrill Lynch for $38.25 billion in stock.The Wall Street Journal reported later that day that Merrill Lynch was sold to Bank of America for 0.8595 shares of Bank of America common stock for each Merrill Lynch common share, or about US$50 billion or $29 per share. This price represented a 70.1% premium over the September 12 closing price or a 38% premium over Merrill's book value of $21 a share but that also meant a discount of 61% from its September 2007 price. Congressional testimony by Bank of America CEO Kenneth Lewis, as well as internal emails released by the House Oversight Committee, indicate that Bank of America was threatened with the firings of the management and board of Bank of America as well as damaging the relationship between the bank and federal regulators, if Bank of America did not go through with the acquisition of Merrill Lynch.[50][51][52] In March 2009 it was reported that in 2008, Merrill Lynch received billions of dollars from its insurance arrangements with AIG, including $6.8bn from funds provided by the United States tax payers to bail out AIG.

lobal Reach
Bank of America Merrill Lynch spans the Globe with divisions in United States, South America, Europe, and Asia. The U.S. headquarters are located in New York, South American Headquarters are at Brazil and Uruguay, European headquarters are based in London, and Asia headquarters are based in Hong Kong.

CDO controversies
Merrill Lynch, like many other banks, became heavily involved in the mortgagebased collateralized debt obligation (CDO) market in the early 2000s.

According to an article in Credit magazine, Merrill's rise to be the leader of the CDO market began in 2003 when Christopher Richard brought his CDO team from CREDIT SUISSE FIRST BOSTON to Merrill. In 2005 Merrill took out advertisements in the back of Derivatives Week magazine, touting the fact that its Global Markets and Investing Group was the "#1 global underwriter of CDOs in 2004". To provide a ready supply of mortgages for the CDOs, Merrill purchased First Franklin Financial Corp., one of the largest subprime lenders in the country, in December 2006. Business Week would later describe how between 2006 and 2007, Merrill was "lead underwriter" on 136 CDOs worth $93 billion. By the end of 2007, the value of these CDOs was collapsing, but Merrill had held onto portions of them, creating billions of dollars in losses for the company.

In mid 2008, Merrill sold a group of CDOs that had once been valued at $30.6 billion to Lone Star Funds for $1.7 billion in cash and a $5.1 billion loan.

In April 2009, bond insurance company MBIA sued Merrill Lynch for fraud and five other violations. These were related to the credit default swap "insurance" contracts Merrill had bought from MBIA on four of Merrill's mortgage-based collateralized debt obligations. These were the "ML-Series" CDOs, Broderick CDO 2, Highridge ABS CDO I, Broderick CDO 3, and Newbury Street CDO. MBIA claimed, among other things, that Merrill defrauded MBIA about the quality of these CDOs, and that it was using the complicated nature of these particular CDOs (CDOs squared and cubed) to hide the problems it knew about in the securities that the CDOs were based on. However, in 2010 Justice Bernard Fried disallowed all but one of the charges: the claim by MBIA that Merrill had committed breach of contract by promising the CDOs were worthy of an AAA rating when, it alleges, in reality they weren't. When the CDOs lost value, MBIA wound up owing Merrill a large amount of money. Merrill disputed MBIA's claims.

In 2009 Rabobank sued Merrill over a CDO named Norma. Rabobank later claimed that its case against Merrill was very similar to the SEC's fraud charges against Goldman Sachs and its Abacaus CDOs. Rabobank alleged that a hedge fund named Magnetar Capital had chosen assets to go into Norma, and allegedly bet against them, but that Merrill had not informed Rabobank of this fact. Instead, Rabobank alleges that Merrill told it that NIR Group was selecting the assets. When the CDO value tanked, Rabobank was left owing Merrill a large amount of money. Merrill disputed the arguments of Rabobank, with a spokesman claiming "The two matters are unrelated and the claims today are not only unfounded but werent included in the Rabobank lawsuit filed nearly a year ago".

Enron/Merrill Lynch Nigerian barge

In 2004 convictions of Merrill executives marked the only instance in the Enron investigation where the government criminally charged any officials from the banks and securities firms that allegedly helped the energy giant execute its accounting fraud. The case revolved around a 1999 transaction involving Merrill, Enron and the sale of some

electricity-producing barges off the coast of Nigeria. The charges surrounded the 1999 sale of an interest in Nigerian energy barges by an Enron entity to Merrill Lynch was a sham that allowed Enron to illegally book about $12 million in pretax profit, when in fact there was no real sale and no real profit. Four former Merrill top executives and two former midlevel Enron officials faced conspiracy and fraud charges. Merrill cut its own deal, firing bankers and agreeing to the outside oversight of its structured-finance transactions. It also settled civil fraud charges brought by the U.S. Securities and Exchange Commission, without admitting or denying fault.

Discrimination charges
On June 26, 2007, the U.S. Equal Employment Opportunity Commission (EEOC) brought suit against Merrill Lynch, alleging the firm discriminated against Dr. Majid Borumand because of his Iranian nationality and Islamic religion, with "reckless disregard" for his protected civil rights. The EEOC law suit maintains that violations by members of the firm were intentional and committed with malice. In another case concerning mistreatment of another Iranian employee by Merrill Lynch on July 20, 2007, a NASD arbitration panel ordered Merrill Lynch to pay its former Iranian employee, Fariborz Zojaji, $1.6 million for firing him due to his Persian ethnicity. Merrill Lynch's actions prompted reactions from both the National Iranian-American council, and the American-Arab Anti-Discrimination Committee. In its June 2008 issue, Diversity Inc. named Merrill Lynch one of the top 10 companies for lesbian, gay, bisexual, and transgendered employees, and the No.7 top company in the US for diversity overall. In 2007, Merrill Lynch was named the No.2 best company in the US for people with disabilities by Diversity Magazine. As of June 5, 2008, Merrill Lynch has created the West Asian, Middle Eastern and North African (WAMENA) Professional Network to help support and provide additional resources for employees of diverse backgrounds. In May 2008, Merrill Lynch was named the No.1 US company for "Diverse College Graduates" by Diversity Edge magazine, edging out Microsoft for the top spot on the rankings.

New Jersey appeals court on August 13, 2008 rendered a ruling against Merrill Lynch in a discrimination law suit filed by a gay employee.

Financial Highlights
2001 Net Operating Earnings (in millions)* Stockholders Equity (in millions ) Operating Return on Average Common Stockholders Equity* Diluted Operating Earnings Per Common Share* Dividends Paid Per Common Share Book Value Per Common Share $2.50 $0.64 $23.03 $4.11 $0.61 $21.95 $3.11 $0.53 $16.49 $1.83 $2.33 11.7% 24.2% 23.8% 16.3% 25.9% 2000 1999 1998 1997 $1,928 $2,381 $3,784 $2,693 $1,559

$20,008 $18,304 $13,004 $10,264 $8,663

$0.46 $0.38 $13.31 $11.69

Delivering Shareholder Value

Merrill Lynch is committed to delivering value to shareholders. Towards this end, they are pursuing the following financial targets that they announced in May 2000: Pre-tax margin improvement from 19% in 1999 to 24% by end of 2003 Double-digit earnings growth Minimum return on equity of 18%20% They believe that achieving these results, combined with an emphasis on improving the stability of risk-adjusted returns, should deliver significant shareholder value.

1.)

Margin Improvement With Double-Digit Earnings Growth

Revenue growth combined with improvement in the pre-tax margin should produce double-digit earnings growth. Pre-tax margin increases would represent a combination of increased revenues and an effective focus on expenses, while they continue to invest in the franchise. Key to successful margin expansion is our resource allocation focus that leads to shifting their people, financial, technical and other resources away from areas that offer lower returns or less growth towards those areas that offer more attractive opportunities.

2.)

Return on Equity

In addition to strong earnings growth, we seek consistently high returns on equity while maintaining a strong financial position. Achieving this objective relies on efficient deployment of capital and other resources; effective risk management; and sound liquidity, funding, and equity management. 3.) Capital Allocation

They assign each business unit an amount of equity that reflects its risks, both on and off the balance sheet. Our aim is to expand businesses that are expected to earn strong returns, and restructure or exit those that fall short, subject to our overall corporate strategic objectives. They look at returns, taking into account both accounting and cash flow measures of performance, and seek only that growth which is profitable.

4.)

Liquidity and Funding

The principal objective of our funding policy is to assure liquidity at all times across market cycles and through periods of financial stress. In managing our funding programs, we maintain alternative sources of funding to enable all debt obligations maturing within one year to be repaid without raising new debt. They also enhance liquidity by ensuring that sufficient long-term debt equivalents and equity capital are in place relative to assets, commitments, and contingent obligations. They manage the interest rate and currency exposures of our assets and liabilities, and we diversify our funding sources, including deposits, globally to minimize our overall cost of funding.

Corporate Risk Management

CRM is an independent control function responsible for Merrill Lynchs market and credit risk management processes. The co-heads of CRM report directly to the Chief

Financial Officer who chairs the ROC and is a member of the Management Group. Market risk is defined to be the potential change in value of financial instruments caused by fluctuations in interest rates, exchange rates, equity and commodity prices, credit spreads, and/or other risks. Credit risks are defined to be the potential for loss that can occur as a result of impairment in the creditworthiness of an issuer or counterparty or a default by an issuer or counter party on its contractual obligations. CRM also provides Merrill Lynch with an overview of its risk for various aggregate portfolios and develops the analytics, systems, and policies to conduct all risk management functions. CRMs chief monitoring and risk measurement tool is Merrill Lynchs Risk Framework. The Risk Framework defines and communicates Merrill Lynchs risk tolerance and establishes aggregate and broad risk limits for the firm. Market risk limits are intended to constrain exposure to specific classes and factors of market risk and Value-at-Risk (VAR).VAR is a statistical measure of the potential loss in the fair value of a portfolio due to adverse movements in underlying risk factors. Credit risk limits are intended to constrain the magnitude and tenor of exposure to individual counterparties and issuers, types of counterparties and issuers, countries, and financing collateral. Risk Framework exceptions and violations are reported and investigated at pre-defined and appropriate levels of management. The Risk Framework and its limits have been approved by the Management Group and the risk parameters that define the Risk Framework have been reviewed by the Audit Committee. The Management Group reviews the Risk Framework annually and approves any material changes. The ROC reports all substantive Risk Framework changes to the Audit Committee. The overall effectiveness of Merrill Lynchs risk processes and policies can be seen on a broader level when analyzing weekly net trading revenues over time. CRM policies and procedures of monitoring and controlling risk combined with the businesses focus on customer order-flow driven revenues and selective proprietary positioning have helped Merrill Lynch to reduce earnings volatility within its portfolios. While no guarantee can be given regarding future earnings volatility, Merrill Lynch will continue to pursue policies and procedures that assist the firm in measuring and monitoring its risks.

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. The conduct here was clearly inappropriate, Scott W. Friestad, the agencys associate director for enforcement, said in a statement. Investors have the right to expect that their brokers wont misuse their order information. Bank of America acquired Merrill in January 2009. The S.E.C. said the conduct took place before the merger. Merrill has since adopted a number of policy changes, Bill Halldin, a Bank of America spokesman, said in a statement. Mr. Halldin added that the policy changes, which include enhanced training and supervision, address the S.E.C.s concerns. The agencys charges stem from Merrills equity strategy desk, which ran the firms proprietary trading operation from 2003 to 2005. A firms proprietary trading desk executes trades solely for the benefit of the firm. Merrills proprietary traders received tips from colleagues on the firms market-making desk about confidential customer trade orders, according to the S.E.C. The proprietary traders then used the information to place trades on the firms behalf. In doing so, Merrill misused this information and acted contrary to its representations to customers, the S.E.C. said in a statement. The conduct does not amount to so-called frontrunning, because Merrill placed its own trades after executing the customers trades. Merrill closed the equity strategy desk in early 2005, according to Mr. Halldin. The firm did not admit or deny any wrongdoing.

The S.E.C.s accusations also cover undisclosed fees that Merrill charged its customers from 2002 to 2007. According to the agency, Merrill charged select wealthy customers fees based on prices less favorable to the customer than the prices at which Merrill purchased or sold the securities. Charging these undisclosed mark-ups and mark-downs was improper and contrary to Merrills agreements with its customers, said Robert B. Kaplan, the co-chief of the agencys asset management unit.

Merrill Lynch fined $1 Million for Bonus clawback

The big bonuses doled out at Merrill Lynch during the height of the financial crisis have once again reared their ugly head. Merrill Lynch agreed on Wednesday to pay regulators $1 million to settle accusations that it thwarted rules for clawing back the compensation. The bonuses were tied to the firms merger with Bank of America, which came in early 2009. The Financial Industry Regulatory Authority, Wall Streets self-regulator, sanctioned the firm for requiring former highly paid brokers to settle disputes over retention bonuses in New York State court. Under the authoritys rules, brokerage firms are supposed to allow employees access to arbitration panels, rather than state courts, which are less-friendly turf for employees. Merrill Lynch specifically designed this bonus program to bypass the authoritys rule requiring firms to arbitrate disputes with employees, and purposefully filed expedited collection actions in New York state courts and denied those registered representatives a forum to assert counterclaims, Brad Bennett, the authoritys enforcement chief, said in a statement. Bonuses awarded at Merrill Lynch ahead of the Bank of America deal have been the subject of much regulatory scrutiny. In 2010, Bank of America paid the Securities and Exchange Commission $150 million to settle accusations that it hid the bonuses from shareholders before the deal closed. But in the latest case, the former Merrill brokers make for unlikely victims.

Merrill awarded $2.8 billion in bonuses, set up as loans that would come due if an employee departed, to more than 5,000 high-producing brokers to keep them happy during the tumult of the Bank of America takeover, according to the Financial Industry Regulatory Authority. Soon after, several brokers fled the firm, while stiffing Merrill for the cash owed under the loan. Its important to remember that legal action only occurs when a former employee doesnt repay their loan as they had agreed to do, a Merrill Lynch spokesman, Bill Haldin, said in the statement. Given that well over 90 percent of financial advisers who participated in the program are still with us, repayment problems havent been a widespread issue. Merrill Lynch filed nearly 100 cases against their former brokers in New York State court, a breach of the authoritys rules. New York State court, Finra noted, greatly limits the ability of defendants to assert counterclaims in such actions. Merrill Lynch neither admitted nor denied the charges, but consented to Finras enforcement action and fine. The Financial Industry Regulatory Authority also accused Merrill Lynch of drafting the bonus program in a way that obscured that the bonuses came from the firm. Instead, Merrill Lynch structured it to seem that the bonuses stemmed from MLIFI, an affiliate not under the authoritys jurisdiction.