Merrill Lynch is Dumping Its CDOs (Collateralized Debt Obligations)

Oh yes, the entertaining news:

The sovereign state of Connecticut has filed suit against the rating agencies – making the usual charge, that they knew or should’ve known that those freak investments Connecticut bought from Wall Street weren’t as solid as they thought they were.

That’s what happens at the end of a bubble. The crybabies and whiners come out.

Meanwhile, Merrill Lynch is dumping its CDOs (collateralized debt obligations)… After telling clients – and itself – that they were worth $1, it’s selling them for 22 cents.

And pity the poor Singapore government. It thought is scored a coup when it bought Merrill stock for $48 a share. Now, Merrill is forced to raise capital again. But this time it’s selling $8.5 billion worth of shares at only $22.50.

No doubt, attorneys are looking at Merrill too, trying to find an incriminating email – proving that Merrill knew or should have known that its own shares and CDOs were trash.

What is amazing to us is how there could have been any doubt about it. We said so often in these Markets and Moneys. The state of Connecticut…or nation of Singapore…could have found out for free. If they didn’t, it’s their own damned fault.

Or, as George W. Bush put it, the financial industry had “gotten drunk.” Everyone knew it had been one helluva party. Then, as the financiers fumbled for their keys, and got in their cars, could there have been any doubt that there would be accidents on the way home?

But now that the crack-ups are in the headlines, the lawyers, police and insurance companies are coming out. Like all major accidents, these will end in disgrace, chapter 11, and jail.

Bill Bonner
for Markets and Money

Bill Bonner

Bill Bonner

Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America’s most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind Markets and Money.
Bill Bonner

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2 Comments on "Merrill Lynch is Dumping Its CDOs (Collateralized Debt Obligations)"

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justin
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I read a day or two ago that the reason why NAB wrote off the value of their CDO’s was because they are partners in crime in with Merrill Lynch.

Do you have your savings with NAB?

Freak'd
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Do I have savings with NAB? Yes Justin, I freaking well do, in one of their crappy super funds chosen by an employer and not so easy to get out. So far OK, but I’m a little suspicious that they may feel the need to raid the “superannuation cookie jar” to prop up the business, perhaps via less than transparent unit pricing shenanigans, or some other yet to be revealed slippery slimy financial trick.

wpDiscuz
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