Merrill Takes Another $9 Billion in Gambling Losses, Firing 4,000 People Not Responsible

Henry Blodget | April 17, 2008 7:48 AM

roulette_lg.jpgMerrill Lynch's mortgage gambling tab keeps growing (MER). $8 billion in Q3, $12 billion in Q4, and now another $9 billion in Q1. That's $29 billion all told (so far), or approximately 4 years worth of earnings.

Put differently, four years worth of work by 60,000+ Merrilly Lynch executives worldwide has been vaporized in the past nine months by a handful of dice-throwers on a trading desk and some facilitators in senior management. Thankfully, Merrill is addressing the problem: In addition to taking the write-offs, it's firing 4,000 people who had nothing to do with the gambling addiction.

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12 Comments

MERDude said:
We may be soon at the point where the total net earnings under the Stan era will be negative - pretty mind-blowing, given the hubris of the Stan/Amass/et al team. It is good to see the financial housecleaning, but I think the HR/exec housecleaning is losing steam. Several guys directly associated with this fast and loose era have convinced the new management they knew nothing (showing selective emails to support their position).

With $29B in losses so far, and more to come, Thain needs to error on the side of guilty until proven innocent, make deeper exec cuts on the finance and capital markets side, and rebaseline the business culturally and financially.
ExSovereignWealthy said:
This is just another sign that the 'heads I win, tales I win but just not as big' mentality embraced by the leaders of the financial world in recent years is not healthy for America. Fiduciary responsibility and a focus on the long term benefits to stakeholders has been replaced by very short-term, self-interested "hedge fund style" thinking. Implicit in this is a belief that since nobody can really predict the future, the maximum trading profits and fees have to be generated in the near term to ensure traders' and bankers' bonuses. They take on maximum risk in an effort to inflate their own compensation, and then when things don't work out, they can still exit with a bundle - it's the shareholders and the lower-level, "five figure" employees who will suffer. Personally I think the business needs a massive retrenchment, starting with the elimination of the insane provision that 50% of revenues are earmarked for compensation - I don't know a single other business that functions that way in the 21st century.
John said:
Henry: The crime might have been different, but I don't think your actions were all that different You partied along with the rest of them and had the same mindset.
John said:
Nice of Henry Blodget to write about the mess on Wall Street. Most people forget how he contributed to the mess back in the late 90's? Was he responsible?
DW Research said:
Don't be hating on Henry here. Along with Michael Lewis, Andy Kessler, and the guys that wrote "Monkey Business," he is one of the few ex-Wall Streeters to expose the business for what it really is.
ExSovereignWealthy said:
Good point DW, required reading for those who want to know what it;s like on the inside:

On bond trading - the famous "Liar's Poker" by Mike Lewis

On equity research & '90s tech bubble - the lesser known "Wall Street Meat" by Andy Kessler (got to love the part where the Queen of the Net whines about car service reimbursement)

On i-banking - "Monkey Business" by John Rolfe & Peter Troob (sample highlight: DLJ associate urinates under the table at the Rainbow Room because he can't be bothered to walk to the Mens)

Don't think anyone has yet done an insider expose on hedge funds but maybe the 2/20 money's just too damn good

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missy (URL) said:
640-802 / MB2-632 / 642-456 / 70-237 / 642-552 / 70-237Merrill Takes Another $9 Billion in Gambling Losses, Firing 4,000 People Not Responsible I told you so! I told you so! It won't work. What a shame (pity)! Or That's too bad.

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