US Financial Crisis: The Fall ofMerrill Lynch



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Code : ECC0024

Year :
2008

Industry : Banking, Insurance and Financial Services

Region : US

Teaching Note: Available

Structured Assignment : Available

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Abstract: The case is structured to resolve two interesting dilemmas: (a) should Merrill Lynch have heen saved through a merger with BoA? (b) What is the economic logic behind BoA's decision to take over Merrill Lynch in the midst of US financial crisis (2008)? The case presents a brief history of Merrill Lynch and discusses the growth of Merrill Lynch, followed by its involvement in subprime mortgage business. It explores the financial history of the firm in relation to mortgage-backed Collateralised Debt Obligations (CDOs). The case presents uncertainty created by declining housing markets and the following credit squeeze. The case describes the final attempts by the firm to survive in the tough financial conditions and the consequences that led Bank of America (BoA) to take over Merrill Lynch.

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Pedagogical Objectives:

  • To analyse the factors that led Merrill Lynch to enter into the mortgage business and ultimately into US financial crisis
  • To understand the strategies adopted by Merrill Lynch confronting the uncertainty created by crumbling housing and credit markets
  • To discuss the conditions that led BoA to takeover Merrill Lynch and what are the alternative strategies the firm could have adopted to survive in the crisis.

    Keywords : Financial Crisis, Subprime Mortgage Business, Mortgage Backed Securities (MBS), Financial Markets, Merrill Lynch, Bank of America, Collateral Debt Obligations (CDOs), Credit Default Swaps (CDS), Subprime Mortgage Crisis, Investment Banking, Asset Management, Wealth Management, Charles E. Merrill,Hedge Funds

    Contents :
    Brief History of Merrill Lynch
    Involvement of Merrill Lynch in Mortgage Crisis
    Takeover of Merrill Lynch: A Positive Sign for BoA


    Case Introduction >>


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