Towards the end of last year, Bank of America, apparently seeing a depressed valuation for Merrill Lynch and lusting after their considerable retail distribution network, agreed to purchase the firm. According to BofA’s CEO Ken Lewis, though, there was more to the story, as he now tells the NY Attorney General that he was pressured.
Put this one in the ‘Ripley’s Believe it Or Not’ file. Apparently at the March NAIC meeting the SVO Initiatives Working Group was charged with examining how the Securities Valuation Office could be expanded into a nonprofit ratings agency. OK, stop reading and go back and read that last sentence again. Could the SVO become.
That seems to be the message from the respected Economic Cycle Research Institute, whose weekly index of leading indicators has started turning up and seems to be staying above cycle lows during Q4. Economic activity in the US does seem to be contracting at a lesser rate and this is telling us that light at.
The Federales’ latest announcements – $1 trillion in financing from the Fed and the latest Treasury plans to use public-private entities to buy ‘toxic’ assets – have one thing in common: Leverage used to finance assets that are valued at a questionable amount. Subprime borrowers also used leverage to finance homes whose prices looked to.