Magazine article The American Conservative

Blundering Herd

Magazine article The American Conservative

Blundering Herd

Article excerpt

The federal government is floating a plan to consolidate troubled assets into a "bad bank." It may have already created one. On Sept. 15, the day Lehman Brothers collapsed, Bank of America announced its rescue of Merrill Lynch. Desperate to keep another Wall Street titan from toppling, Washington played not-so-silent partner, sweetening the deal with $25 billion of TARP funds. This month it shoveled in another $20 billion, along with $118 billion in loan guarantees.

But all those billions can't stanch the bleeding: shares of Bank of America have fallen 85 percent since the acquisition was announced, costing shareholders $250 billion. As the deal closed, Merrill chairman John Thain was busy passing out $25 million in parting gifts from the office he had recently redecorated. When your bank is on the skids, it might be wise to forego that $87,783 area rug, $68,178 credenza, and $1,404 trashcan, but Thain actually came in under his $1.8 million budget. …

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