Everyone has a part of their job that sucks, no matter how satisfied they are overall. When it comes to my work here at WSO, this is the part of the job that sucks. After two and half years, the most tiresome thing I have to write about is the stupid shit Wall Street firms have done to contribute to or exacerbate the 2008 crisis. If you want to know the truth, the only reason I still write about this stuff is the sense of obligation I feel to you guys to make you aware of some of the pitfalls of the business in the vain hope that at least some of you will be able to avoid them.
In this particular case, Playboy article. Over the years, though, Merrill was one of the better managed and successful firms, and my problem with them was primarily their refusal to hire a young Eddie Braverman.are the knuckleheads du jour. In the interest of full disclosure, I'll tell you that I've always had a personal ax to , and it was a Merrill VP whom I targeted with my dumpster diving campaign in the
Anyway, here's the latest.
It appears the powers that be over at Merrill in 2006 knew that the biscuit wheels had fallen off thegravy train and, rather than stop creating a security there was no market for, they doubled down and created a division within the firm designed to buy the toxic shit no one else wanted. Knowing this division would lose money from day one, the division's bonus pool was based on a percentage of the dollar volume of toxic assets they moved off the books.
Dubbed "Millions for Billions", it looks like the division was paid $1 million in bonus money for every $1 billion in illiquid AAA-rated CDO tranches they bought.
The group, created in 2006, accepted tens of billions of dollars of Merrill's Triple A-rated mortgage-backed assets, with disastrous results. The value of the securities fell to pennies on the dollar and helped to sink the iconic firm. Merrill was sold to, which was in turn bailed out by taxpayers.
What became of the bankers who created this arrangement and the traders who took the now-toxic assets? They walked away with millions. Some still hold senior positions at prominent financial firms.
If you guys think this kind of thing can't happen to you, you're wrong. In order for a scheme like this to work, the division had to be staffed with junior guys who didn't have the stroke to raise the bullshit flag and question what upper management was up to.
Again, I've grown to hate writing about stuff like this, and I long for the days when the street-level hustlers were the crooks and the guys at the top cared more about their firm's reputation than they did about buying a seventh yacht. It's true that Stan O'neal got thrown out on his ass behind the CDO mess, and he should have. But there are plenty of high-level derelicts who've done far worse and still have their jobs.