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Crash of the Titans
Cover of Crash of the Titans
Crash of the Titans
Greed, Hubris, the Fall of Merrill Lynch, and the Near-Collapse of Bank of America
Borrow Borrow Borrow
The intimate, fly-on-the wall tale of the decline and fall of an America icon
 
With one notable exception, the firms that make up what we know as Wall Street have always been part of an inbred, insular culture that most people only vaguely understand. The exception was Merrill Lynch, a firm that revolutionized the stock market by bringing Wall Street to Main Street, setting up offices in far-flung cities and towns long ignored by the giants of finance. With its “thundering herd” of financial advisers, perhaps no other business, whether in financial services or elsewhere, so epitomized the American spirit. Merrill Lynch was not only “bullish on America,” it was a big reason why so many average Americans were able to grow wealthy by investing in the stock market. 
Merrill Lynch was an icon. Its sudden decline, collapse, and sale to Bank of America was a shock. How did it happen? Why did it happen? And what does this story of greed, hubris, and incompetence tell us about the culture of Wall Street that continues to this day even though it came close to destroying the American economy? A culture in which the CEO of a firm losing $28 billion pushes hard to be paid a $25 million bonus. A culture in which two Merrill Lynch executives are guaranteed bonuses of $30 million and $40 million for four months’ work, even while the firm is struggling to reduce its losses by firing thousands of employees.
Based on unparalleled sources at both Merrill Lynch and Bank of America, Greg Farrell’s Crash of the Titans is a Shakespearean saga of three flawed masters of the universe. E. Stanley O’Neal, whose inspiring rise from the segregated South to the corner office of Merrill Lynch—where he engineered a successful turnaround—was undone by his belief that a smooth-talking salesman could handle one of the most difficult jobs on Wall Street. Because he enjoyed O’Neal’s support, this executive was allowed to build up an astonishing $30 billion position in CDOs on the firm’s balance sheet, at a time when all other Wall Street firms were desperately trying to exit the business. After O’Neal comes John Thain, the cerebral, MIT-educated technocrat whose rescue of the New York Stock Exchange earned him the nickname “Super Thain.” He was hired to save Merrill Lynch in late 2007, but his belief that the markets would rebound led him to underestimate the depth of Merrill’s problems. Finally, we meet Bank of America CEO Ken Lewis, a street fighter raised barely above the poverty line in rural Georgia, whose “my way or the highway” management style suffers fools more easily than potential rivals, and who made a $50 billion commitment over a September weekend to buy a business he really didn’t understand, thus jeopardizing his own institution. 
The merger itself turns out to be a bizarre combination of cultures that blend like oil and water, where slick Wall Street bankers suddenly find themselves reporting to a cast of characters straight out of the Beverly Hillbillies. BofA’s inbred culture, which perceived New York banks its enemies, was based on loyalty and a good-ol’-boy network in which competence played second fiddle to blind obedience.

Crash of the Titans
is a financial thriller that puts you in the theater as the historic events of the financial crisis unfold and people responsible for billion of dollars of other people’s money gamble recklessly to enhance their power and their paychecks or to save their own skins. Its wealth of never-before-revealed information and focus on two icons of corporate...
The intimate, fly-on-the wall tale of the decline and fall of an America icon
 
With one notable exception, the firms that make up what we know as Wall Street have always been part of an inbred, insular culture that most people only vaguely understand. The exception was Merrill Lynch, a firm that revolutionized the stock market by bringing Wall Street to Main Street, setting up offices in far-flung cities and towns long ignored by the giants of finance. With its “thundering herd” of financial advisers, perhaps no other business, whether in financial services or elsewhere, so epitomized the American spirit. Merrill Lynch was not only “bullish on America,” it was a big reason why so many average Americans were able to grow wealthy by investing in the stock market. 
Merrill Lynch was an icon. Its sudden decline, collapse, and sale to Bank of America was a shock. How did it happen? Why did it happen? And what does this story of greed, hubris, and incompetence tell us about the culture of Wall Street that continues to this day even though it came close to destroying the American economy? A culture in which the CEO of a firm losing $28 billion pushes hard to be paid a $25 million bonus. A culture in which two Merrill Lynch executives are guaranteed bonuses of $30 million and $40 million for four months’ work, even while the firm is struggling to reduce its losses by firing thousands of employees.
Based on unparalleled sources at both Merrill Lynch and Bank of America, Greg Farrell’s Crash of the Titans is a Shakespearean saga of three flawed masters of the universe. E. Stanley O’Neal, whose inspiring rise from the segregated South to the corner office of Merrill Lynch—where he engineered a successful turnaround—was undone by his belief that a smooth-talking salesman could handle one of the most difficult jobs on Wall Street. Because he enjoyed O’Neal’s support, this executive was allowed to build up an astonishing $30 billion position in CDOs on the firm’s balance sheet, at a time when all other Wall Street firms were desperately trying to exit the business. After O’Neal comes John Thain, the cerebral, MIT-educated technocrat whose rescue of the New York Stock Exchange earned him the nickname “Super Thain.” He was hired to save Merrill Lynch in late 2007, but his belief that the markets would rebound led him to underestimate the depth of Merrill’s problems. Finally, we meet Bank of America CEO Ken Lewis, a street fighter raised barely above the poverty line in rural Georgia, whose “my way or the highway” management style suffers fools more easily than potential rivals, and who made a $50 billion commitment over a September weekend to buy a business he really didn’t understand, thus jeopardizing his own institution. 
The merger itself turns out to be a bizarre combination of cultures that blend like oil and water, where slick Wall Street bankers suddenly find themselves reporting to a cast of characters straight out of the Beverly Hillbillies. BofA’s inbred culture, which perceived New York banks its enemies, was based on loyalty and a good-ol’-boy network in which competence played second fiddle to blind obedience.

Crash of the Titans
is a financial thriller that puts you in the theater as the historic events of the financial crisis unfold and people responsible for billion of dollars of other people’s money gamble recklessly to enhance their power and their paychecks or to save their own skins. Its wealth of never-before-revealed information and focus on two icons of corporate...
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  • From the book CHAPTER 1

    THE YOUNG TURK

    "My name's Tom Spinelli," said the man at the microphone. "Good morning, Mr. O'Neal, members of the board, executive committee, and fellow shareholders. I would like to apologize in advance if my voice appears to be too loud. The reason is because I have subjective tinnitus; it's a hearing disorder."

    Spinelli was in the auditorium of Merrill Lynch's sprawling corporate center outside Princeton, New Jersey, on the occasion of the company's annual meeting on April 27, 2007. Merrill Lynch's chief executive, Stan O'Neal, had just reviewed the ninety-three-year-old firm's record-breaking results in 2006 for his audience. The company he had led since 2002 posted $7.3 billion in profits for the previous year, dwarfing the 2005 earnings of $5 billion, which were also a record. O'Neal could now bask in the glow of his success and soak up the praise bestowed by Spinelli and other investors.

    "I would like to emphasize that I've been an employee, client, and shareholder for over thirty-five years," Spinelli continued. "I do know that during your tenure here at Merrill Lynch I have discovered a wealth of new products and services unlike anything I've ever seen in the past. As a client it has enabled me to take full advantage of so many excellent investment opportunities in the marketplace. I am now in a position to provide a much more secure financial future for members of my family and myself.

    "This is a comment and a personal observation. I neither have the inclination or frame of mind to put you in an awkward position. However it should be stated that thanks to your knowledge, skills, superb leadership, and the expertise of designated members of the executive committee, Merrill is now back and in excellent competitive form."

    Annual shareholder meetings, supposedly the great democratizing force of corporate America, are curious affairs, with CEOs re-elected almost by acclamation by the votes of institutional investors representing huge blocs of votes. The few individual shareholders who do attend often fall into one of two categories: activists agitating for change and well-meaning individuals entranced by the prospect of getting themselves in front of a microphone before a captive audience.

    "As you know, the 2008 presidential election is starting to heat up again," Spinelli went on. "I'm convinced that the Democrats will win back the White House in the aforementioned election. Under our new presidential administration I am confident that you will be called upon [by] our president-elect to serve as his, as an elite member of his or her new cabinet.

    "It would be similar to what late President Ronald Reagan did for former chairman and CEO of Merrill Lynch, Don Regan, in 1980, who quietly slipped away in 2003. If you accept to do for our country what you have done for Merrill Lynch, I would no longer just be a content American, I would be a proud American. Thank you and have a nice day."

    O'Neal smiled at this bouquet of gushing praise. "Just the opposite of being too loud," the CEO said facetiously, pretending not to hear. "If you would say that again . . . I'm not sure I caught all of it." The audience broke up in laughter.

    "Thank you very much for your comments," O'Neal continued. "And I have no intention of going anywhere, I'm afraid, because this is where I want to be. Thank you."

    The annual meeting ended, and O'Neal exulted in his achievements. He had, single-handedly it seemed, rescued Merrill Lynch from irrelevance and established himself as one of the most successful CEOs on Wall Street and in corporate America.

    Leaving the conference center, O'Neal would join his directors...
About the Author-
  • GREG FARRELL is a correspondent for the Financial Times. In January 2009, he broke the news that Merrill Lynch had paid out its 2008 bonuses a month ahead of schedule, in December, even though Merrill was in the process of losing $28 billion for the year, and Bank of America needed an extra $20 billion in taxpayer funds to complete its acquisition of the firm. That story sparked an investigation by New York attorney general Andrew Cuomo. Greg is a past winner of the American Business Press's Jesse Neal Award for investigative reporting and a recipient of the Knight-Bagehot Fellowship for business journalism. He earned a BA from Harvard University and an MBA from the Graduate School of Business at Columbia University.
Reviews-
  • Salon

    "Eminently readable and convincing...There's great value to be gained in the detail that Farrell reveals."

  • USA Today "An exhaustive reconstruction of how Merrill Lynch & Co. sealed its own fate bybecoming more bullish on bonuses than on America." --James Pressley, Bloomberg "Farrell weaves his facts into a story...piling detail upon detail to sketch the innerworkings of Merrill Lynch, which he calls the Wall Street firm that made it possible foraverage Americans to reap handsome returns in the stock market."
  • BusinessWeek "The...financial crisis's answer to Game Change--John Heilemann and Mark Halperin'stattle-filled bestseller about the 2008 Presidential election--Farrell shows that... seemingly trivial matters became the obsessions of Wall Street executives as the subprime contagion spread."
  • Financial Times "Immaculately reported...Farrell has found one of the biggest untold stories of the [financial crisis] drama."
  • Forbes.com "Farrell tells a story based on hundreds of hours of interviews that builds like a hurricane."
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Crash of the Titans
Crash of the Titans
Greed, Hubris, the Fall of Merrill Lynch, and the Near-Collapse of Bank of America
Greg Farrell
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