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New Merrill Lynch Disclosure Shines A Perjurious Light On Ben Bernanke's Sworn Testimony; JP "Fed Lite" Morgan Also Dabbled In Repo 105-type Scams





It seems it was just yesterday that Bernanke was on the edge of committing perjury and lying that the Federal Reserve of New York knew nothing about Lehman's "more peculiar" off balance sheet transactions. Oh wait, it was: as a reminder in his cross by Scott Garrett, the New Jersey representative asked whether the "Fed was aware of the Repo 105 and the accounting irregularities going on?"
Bernanke answers "No - they were hidden." Oops. Because a story just released by the Financial Times seems to indicate otherwise, and unless Merrill Lynch is lying out of their derriere, Mr. Bernanke should be immediately investigated for potential perjury before the American people. "Securities and Exchange Commission and Federal Reserve officials were warned by [Merrill Lynch] that Lehman Brothers was incorrectly calculating a key measure of its financial health months before its collapse in 2008...In the account given by the Merrill officials, the SEC, the lead
regulator, and the New York Federal Reserve were given warnings about
Lehman’s balance sheet calculations as far back as March 2008
."  Amusingly, the sole purpose why Merrill would rat out Lehman is to make its own disastrous situation more agreeable, as often happens when the rats realize the sinking of the ship is inevitable. Well, unlike Merrill, whose liquidity situation was equally as disastrous on the weekend of September 14th, which found a pressed suitor in the form of BofA (and its Fed/Goldman-puppet CEO Ken Lewis), Lehman was not quite so lucky (one wonders why). Yet the bigger issue is why does the Fed keep on lying to the American public without any trace of consequence? When will someone finally wake up and sue the Federal Reserve (and we don't mean FOIA), or at least slap a racketeering lawsuit on "those people?" Oh yeah, the market is up, American Idol is on TV, G-Pap has done all that was needed to (not) be bailed out, so all shall be well. This is better known as "if the other Ponzi dude was thrown in jail, you must acquit" defense.

 
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Dear Senator Corker: Meet The HVol 4 And Basis (Prop) Trades That Destroyed Merrill Lynch





In the past Zero Hedge had respect for Ten. Senator Bob Corker due to his opposition to the nationalization of the bankrupt automakers and making them yet another ward of the ever larger central-planning state. However, after today's hearing with Paul Volcker on the Prop trading ban, any respect we may have had for the Senator has promptly dissipated. While we understand that the pointless bashing of Volcker's proposal by Corker was predicated by his sizable lobby interest (over $21 million raised in the course of his career) and his talking points were undoubtedly a transliteration of a memorandum submitted by one of the Too Big To Fail banks that stand to experience substantial losses should the Volcker proposal pass, one line of argument in Corker's speech that is flagrantly flawed was Corker's naive rhetorical question whether there has been a single instance during the financial crisis where a commercial bank engaging in proprietary trading led directly to that institution failing or having to be bailed out by the taxpayer. Corker assumed the answer is no and kept pouncing on that answer. Well, Senator, you are wrong - meet Merrill Lynch, incidentally one of your biggest financial backers. Also, please meet Merrill's prop basis trade and its prop HVOL4 trade, which combined were the primary reason for the firm's $15 billion writedown in Q4 of 2008 and the subsequent bail out of the firm by Bank of America.

 
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SEC Seeks To File New Charges Against BofA On Merrill Deal, Full SEC Letter Attached





Dear Judge Rakoff

In accordance with the Court's instruction, we respectfully submit this letter on behalf of Plaintiff Securities and Exchange Commission to seek leave, to file a Second Amended Complain. The SAC adds a count under Section 14(a) of the SEC Act of 1934, and Rule 14a-9 thereunder based on the failure of Bank of America Corporation to update the merger proxy statement, before the December 5, 2008 shareholder vote, concerning extraordinary losses that were sustained by Merrill Lynch & Co. prior to the vote

 
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Merrill RateLab's Stocking Stuffers





Merrill is convinced inflation is a-coming. As such, here are RateLab's proposed top trades, some of which are rather esoteric, others which make intuitive sense (of course, assuming one agrees that inflation trumps deflation: a bold assumption keeping in mind the endless consumer credit collapse). Some of the ideas: i) Sell OTM Payer Skews, ii) GNMA Reverse Mortgage Floaters, iii) Sell MBS/Buy Treasury Strips, iv) Buy CMBX 3 AAA /Sell CMBX 3 A, v) Buy FN 4.5/Sell half of FN 4 and 5 each, vi) Buy August 2025 vs USH0 Basis, and lastly some encouraging words on Agencies. As Zero Hedge is firmly convinced that the entire mortgage market is firmly gamed courtesy of endless Fed intervention which is the defacto buyer of first, middle and last resort, we urge readers to be very careful with any andall MBS/Agency trades.

 
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Merrill Vs (Ex-)Merrill: Rosenberg Takes On David Bianco's Unending Bullish Misperception Misconceptions





The focus of Rosie's morning note has to do with debunking the latest misconception pushed by Barron's, which in all honesty is merely paraphrasing one of Rosie's own successors at Merrill Lynch - David Bianco, whose most recent fluff piece "Harvesting the Truth" (presented below) was an insult to thinking homo sapiens worldwide. The particular item that Rosie has beef with is the Bianco allegation that the consumer is not really 70% of US GDP. Here is Rosie's rebuttal.

 
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Goldman's Complete Presentation And Transcript From The Merrill Lynch Financial Services Conference





"As I’ve said before, the significance of the government’s actions last fall cannot be overstated, and we are grateful. We believe those efforts were critical to protecting the financial system and ensuring the continued viability of the American economy." - Lloyd Blankfein, Goldman Sachs

Thank you government indeed, because without you the "continued viability" of Goldman employees' bank accounts, who from 2000 to 2008, had an average compensation of $196,004, 145% more than the $79,962 peer average, may have well been in jeopardy. As it stands, 2009 will be the greatest pay year on record for Goldmanites, at an average $770,000 all in comp each

 
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Merrill's Contra-Bear Argument





Merrill Lynch (excuse me, BofA/ML as they like to put on the lead left side of REIT prospectuses), presents its case for why optimism dominates and all theories voices by perma-bears "have little founding in economic theory or history." What is notable from the below multi-pronged perspective on the definition of the term "recession" is that BofA/ML's entire argument rests on the premise of a fiat currency as taken for granted. Eliminate that, and the construct of imminent recovery from any and every economic cataclysm becomes immediately flawed. Ironically, the only reason there is no mass violence and civil uprisings right now (which would have been the case had RBS and HBOS gone under, an event which according to Bloomberg was mere hours away), is because printing presses the world over went into overdrive with wanton monopoly money (or nightcrawlers as they have been penned elsewhere in the blogosphere) creation (or destruction, depending on your perspective).

 
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Merrill's Former REIT Analyst Steve Sakwa Dispenses Some Unexpected CRE Pessimism





Steve Sakwa, who we may have had some harsh words for in the past, primarily during his Merrill Lynch tenure, shares some perspectives on Commercial Real Estate. His observation:

"From a financing standpoint things are far worse; from a fundamental standpoint things are certainly getting worse."

 
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Bank Of America Merrill Lynch Gets Paid To Pay Itself Back In Developers Diversified





REIT stocks benefited mightily from Merrill Lynch's generosity earlier in the year, when the ML REIT team issued follow on equity offerings, followed by prompt upgrades to the stock, although not necessarily in that order. The bottom line - roughly 5% in underwriter fees on almost $20 billion worth of new equity issued. And while last week's REIT massively downsized IPOs were an indication that the top for REIT stocks has come, that has not prevented Ken Lewis' firm from continuing to profit handsomely from the next shoe to drop in real estate.

 
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Merrill On Implied Treasury Vol





"Markets are traded by people, not machines; and a person’s ability to absorb risk and anxiety is limited. This is why ultra volatile markets eventually calm down - traders become exhausted and close out their risky positions. Although it certainly felt as if the world was going to end, the reality was: This too will pass. It is now seeming more and more likely that although Bernanke may not be able to guarantee a good ending, at least he can make the path there less bumpy. As such, both Actual and Realized Volatility should slowly decline."

 
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Is Wachtell Lipton's Ed Herlihy On The Hook For The Merrill Bonus Fiasco?





As Zero Hedge previously disclosed, when Judge Rakoff told the SEC to promptly reevaluate its Wall Street pandering ways, one of the notable highlights was his suggestion that the lawyers advising Bank of America themselves may "be held legally responsible" for the creation of the fraudulent proxy statement which blatantly misrepresented the reality over Merrill's bonuses. And the question then becomes: who were the lawyers representing Merrill? Why Bank Of America's darling law firm Wachtell Lipton, and specifically legendary partner Ed Herlihy.

 
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Merrill Lynch RateLab: "Long Live The King (Bernanke)"





"We at the RateLab have long been fans of Ben Bernanke, as such, we are cheered that politics did not trump competence and Bernanke was officially nominated for another four year term as Chairman of the FED. What follows is a linear thought process of what this means for the markets." - Harley Bassman

 
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Merrill To Defer REIT IPO Fees As Investors Balk





In a sign that the REIT market may surprisingly lose its invisible bid, the primary beneficiaries of the IPO pump and dump game, namely Merrill and Deutsche, have announced they are deferring their underwriting fees for REIT IPOs "after buyers balked at the deals" (one doubts Cohen & Steers is part of this group of balkers).

 
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Merrill's RateLab On GSE's: The Denouement





"After all the finger pointing at greedy Wall Street big-wigs, a somnambulant FED, and “tulip-crazed” homeowners is over, the fact remains that the nexus of the housing market is Fannie Mae and Freddie Mac, aka, the GSE’s (Government Sponsored Enterprises). And just as the beginning of this crisis can clearly be marked to the date that their financial situation tipped south, so can we be sure that our problems will not be truly over until they have been stabilized." - Harley Bassman, ML

 
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Merrill's RateLab Retorts To Zero Hedge





Zero Hedge's good-natured critique of Merrill Lynch's most recent RateLab issue seems to have circulated. We present the response by its author to our earlier comments."

 
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