Merrill Lynch once was considered Middle America’s broker and one of the most profitable firms on Wall Street. All that ended rather quickly in the financial crisis. Investors wonder exactly what happened. We know the firm ended with billions of dollars of bad mortgages on its books, but how did a brokerage firm evolve to the point that it was holding these bad assets? One explanation in a recent article in Vanity Fair is Goldman Sachs envy. An excerpt:
The man who wanted to change all that was E. Stanley O’Neal. Having joined the firm as a junk-bond trader in 1986, he had risen to become C.E.O. by 2002—just before Goldman began its magical run. Proud, prickly, intolerant of dissent, and quick to take offense at perceived slights, O’Neal had never worked as a stock broker and had no particular affection for the business that had long been Merrill’s heart and soul. His burning ambition was to transform its Mother Merrill culture, which he viewed (correctly) as bloated and soft—“not adequate to the times,” he once told a colleague—and he wanted to put new emphasis on trading. Most of all, O’Neal pushed Merrill to take more risks and bigger risks—Goldman Sachs—like risks. After all, wasn’t that how one made Goldman Sachs—like profits?
Read the full article to hear the sad story.