In a deal that was set to finalize at the turn of the year, Bank of America’s acquisition of Merrill Lynch has been delayed over BofA’s claims that they’ll need more money in order to complete the government-encouraged deal:
The commitment of funds is further evidence of the banking system’s delicate condition and its hunger for more capital, despite billions of dollars already invested in financial institutions by the government.
Here’s a follow up to a story we first published back in early October: Shareholders from Wells Fargo and Wachovia voted today to approve the merger of the two financial institutions, resulting in the formation of one of the nation’s largest banks. In a deal that began back in late October, Well’s Fargo outbid Citigroup to takeover a struggling Wachovia.
“We are pleased that Wachovia’s shareholders agree that the Wells Fargo/Wachovia combination will provide superior growth and long-term value to shareholders, customers, employees and our communities,” said Robert K. Steel, CEO of Wachovia.
The original direction of the $700 billion bailout plan is evolving over time. It began as a means of buying ‘toxic’ assets from financial institutions, and expanded into buying equity stakes in banks as another way to inject capital into financial institutions; both are intended to unfreeze the credit markets and to spur more lending. Now, as we note here, the program may expand further as the Treasury contemplates doing the same for other credit-related industries.
But meanwhile, back on the banking ranch, a rift has developed between a growing number of lawmakers and the Bush administration over the use of the cash that’s been extended to the banks which have received stock investments.
As our economic landscape continues to be reshaped by unprecedented actions by the government and financial institutions alike, the Federal Trade Commission has a new warning for consumers: “bank failures, mergers, and takeovers are a spammer’s new best friend.” The restructuring of our financial system has given birth to newer and more dangerous “phishing” opportunities that allow spammers the chance to steal your most personal information:
Phishers (pronounced “fishers’) may send attention-getting emails that look like they’re coming from the financial institution that recently acquired your bank, savings and loan, or mortgage. Their intent is to collect or capture your personal information, like your credit card numbers, bank account information, Social Security number, passwords, or other sensitive information. Their messages may ask you to “update,” “validate,” or “confirm” your account information.
“You will lend” was the implicit message passed on to the initial nine banks that received capital injections as apart of the $250 billion TARP program. “We expect all participating banks to continue to strengthen their efforts to help struggling homeowners,” said Treasury Secretary Henry Paulson in a New York Times article yesterday. The simple message here is, “if you’re deemed too big to fail, you must function.”
The Treasury Department is well on its way to rebalancing the entire structure of the banking system. Not only is the Treasury asking the chosen financial institutions that are receiving capital in exchange for preferred shares to jump start the credit markets, they are also urging new bank mergers in order to create fewer, but stronger institutions: Read the rest of this entry »
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