Cilck here to read about Merrill’s big write off. Stanley O’Neal, CEO just last week, is headed for the exits after trying to sell MER to Wachovia without Board authorization. Other ‘banks’ are also taking writedown. This illustrates several concepts we have recently studied in Intermed I.
Take a look at the effect on MER’s IS at the Reuters Sites.
Read down this list of recent news to follow this train wreck.
Materiality-Yes $7.9 B would change my mind about the condition of the company
Historical cost and impairment – asset values which are impaired have to be written down
What is operating and non operating, I am looking for a copy of the third quarter statement where MER took the write down
Stop and think, there are ethical and actual issues involved here too. An Investment Bank normally packages and re sells securities to the public. Here with all these sub prime mortgages in inventory, clearly MER is participating in the market rather tan selling things to the public. As you read the article it is clear this was the idea of O’Neal, take more risk by participating rather than just making commissions.
As my Dad used to say, these guys are not as smart as they think they are.
Professor Elam 
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