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Bank of America - Merrill Lynch Merger


peaceloveunderstanding

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Lewis gave, what they call an "exclusive" interview to CNBC after the press conference.

Basically it sums up like this. (my words, not his)

  • Lewis had to resolve the statements he made earlier this year about not wanting to be in investment banking when basically his own attempt at it failed. Why would it work now?
  • They intend to look at LM as simply another acquisition.
  • They are going to make it a win solution mostly by reducing costs via consolidations. They won't know how much consolidation there will be for a number of months.
  • Brokers and some others at ML will be paid a retention bonus so they won't jump ship.
  • Everyone else is at risk of redundancy due to the consolidation effort.
  • Basically he said his strength to this deal was in doing the transition. i.e. cost reduction

There is a side issue to this not covered but the Mayor of NYC and the Governor of NY state will most likely try to involve their respective governments in this process.

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So what effect will this merger have on the urban environment in Charlotte? (this is urbanplanet right?) I predict that this merger will have very little effect on the urban environment in Charlotte. The biggest potential change I see is maybe Merril Lynch moving their regional office from Southpark to Uptown and putting in some type of street level retail presence in Uptown (similar to what Wahcovia Securities did)....that would be nice...but not something I am expecting to happen anytime soon.

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So what effect will this merger have on the urban environment in Charlotte? (this is urbanplanet right?) I predict that this merger will have very little effect on the urban environment in Charlotte. The biggest potential change I see is maybe Merril Lynch moving their regional office from Southpark to Uptown and putting in some type of street level retail presence in Uptown (similar to what Wahcovia Securities did)....that would be nice...but not something I am expecting to happen anytime soon.

So, it's been about four years, but doesn't ML have their regional offices in the BAC corporate center? I know the complex manager (used to?) work there, with South Park and Lake Norman functioning as satellite offices.

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So what effect will this merger have on the urban environment in Charlotte? (this is urbanplanet right?) ....
I don't think anyone will know until the bank says what they are going to do in terms of employment and operations. I don't think even they know based on the haste on how this was put together. The possibilities range from the extremes of moving of the BofA HQ to NYC to the dismantling of ML and movement of all of its operations to Charlotte. My guess is that people who work directly with customers at both places are going to be OK, but anyone doing any kind of support, especially support subject to outsourcing, will need to start looking at their options. How much of this kind of work is in CLT? I don't know. Maybe someone else does.
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I don't see this having too much effect on things in Charlotte. Merrill's strength is in investment banking and wealth management, and a lot of what B of A has in those two areas is already up in the northeast (NYC and Boston).

"What impact will this deal have on Charlotte?" It seemed to me to be a strange and untimely question to ask at the first press conference for this megadeal. Maybe that's why Ken laughed when it was asked by Rick Rothacker. I would think it would be the farthest thing from Ken's mind at this point.

They will probably HQ the IB part in NYC. Why not, as close as it his tied to Wall St.? I don't know why some people think every time a Charlotte bank buys something, they have to bring it to Charlotte.

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Every time a major institution is gobbled up by BofA, there is a massive debate about the possibility of Charlotte losing it's biggest trophy......

If Charlotte didn't lose the BofA headquarters to San Francisco, why would it lose headquarters status in other mergers? Maybe this is some kind of inferiority complex.........do Charlotteans perhaps think their city isn't up to the task of remaining in the big league?

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^ Yes.

But it's also justified. Even if ML was to move the majority of its operations to Charlotte (it won't), the affect on NYC would be marginal to minimal....if BofA moved its HQ functions and several business lines out of Charlotte, the affect would be disastorous on Charlotte.

I do find it a little juvenile that our hometown paper reporter would ask the question at that point in time. It was premature and does remind everyone in attendance that Charlotte is a small town, but oh well.

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Every time a major institution is gobbled up by BofA, there is a massive debate about the possibility of Charlotte losing it's biggest trophy......

If Charlotte didn't lose the BofA headquarters to San Francisco, why would it lose headquarters status in other mergers? Maybe this is some kind of inferiority complex.........do Charlotteans perhaps think their city isn't up to the task of remaining in the big league?

I think it's because so much of Charlotte's success is attributable to Bank of America. Many people in Charlotte probably realize this fact and that if BofA were to leave, there would be an enormous void left. BofA leaving Charlotte is the one thing that would singlehandedly destroy Charlotte's economy and that fact probably seems to loom over some peoples' minds.

So it's not an inferiority complex so much as it is obssesive paranoia. :thumbsup:

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^ Yes.

But it's also justified. Even if ML was to move the majority of its operations to Charlotte (it won't), the affect on NYC would be marginal to minimal....if BofA moved its HQ functions and several business lines out of Charlotte, the affect would be disastorous on Charlotte.

I do find it a little juvenile that our hometown paper reporter would ask the question at that point in time. It was premature and does remind everyone in attendance that Charlotte is a small town, but oh well.

Yes, 'juvenile', that's the word I was looking for!

Looking at Wachovia's stock performance today, there is a much greater chance that they will be acquired and we will lose that HQ. But that's another thread. . . .

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^ Yes.

But it's also justified. Even if ML was to move the majority of its operations to Charlotte (it won't), the affect on NYC would be marginal to minimal....if BofA moved its HQ functions and several business lines out of Charlotte, the affect would be disastorous on Charlotte.

I do find it a little juvenile that our hometown paper reporter would ask the question at that point in time. It was premature and does remind everyone in attendance that Charlotte is a small town, but oh well.

Do you really think NYC is going to be minimally effected by this whole mess?

Here's an article that discusses the topic better than I can:

http://city-journal.com/2008/18_3_ny_fiscal_crisis.html

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Well, I was specific to ML relocating a majority of its functions to Charlotte, so I will emphatically stand by my statement.

NYC as a whole will remain relatively immune (long term affect wise) to all of this. It, along with London, holds such a central part of a necessary evil in the worlds financial markets, that the services will have to be performed (at least until Artificial Intelligence makes marked improvement), and because of this, will continue to thrive because this is where the talents choses to live. The talent and jobs are so interconnected, that I don't believe we will see a shift from NYC. The funny thing is, to a certain extent, Inv. Banking could be performed anywhere due to the level of communications that now exist, but we have seen no dispersion over the last decade.

To the article's point about tax generation, I think what was somewhat glossed over is the city's reinvestment into its infrastructure. The 2nd Ave subway line is FINALLY underway, and there are plans to leverage public assets out to private developers to pay for improvements. If the city was squandering money like it did in the roaring 20's, I think there would be a concern, but I think they are being much more prudent this go around while the money faucet is still on.

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I think it's because so much of Charlotte's success is attributable to Bank of America. Many people in Charlotte probably realize this fact and that if BofA were to leave, there would be an enormous void left. BofA leaving Charlotte is the one thing that would singlehandedly destroy Charlotte's economy and that fact probably seems to loom over some peoples' minds......

I think this is way way way overstated though I have heard it before. Sure it would be a hit, but it would certainly not destroy Charlotte's economy BofA directly employs about 13,000 or so people in Charlotte in a metro that averages around 850,000 jobs. I would assume a HQ move would not mean that all these jobs would disappear as they still have a retail banking operation to run here. But even if it did, Charlotte would move on. I have lived here when the bank was still just NCNB and confined to just NC and Charlotte was the biggest economy in the Carolinas then. Charlotte would remain that way after such a move as well. Most people don't realize the Charlotte has a a distribution industry and manufacturing industry that is just as large as the finance industry. And then there are a whole host of other industries employing most of the people in this metro.

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I think this is way way way overstated though I have heard it before. Sure it would be a hit, but it would certainly not destroy Charlotte's economy BofA directly employs about 13,000 or so people in Charlotte in a metro that averages around 850,000 jobs. I would assume a HQ move would not mean that all these jobs would disappear as they still have a retail banking operation to run here. But even if it did, Charlotte would move on. I have lived here when the bank was still just NCNB and confined to just NC and Charlotte was the biggest economy in the Carolinas then. Charlotte would remain that way after such a move as well. Most people don't realize the Charlotte has a a distribution industry and manufacturing industry that is just as large as the finance industry. And then there are a whole host of other industries employing most of the people in this metro.

Say 3,000 jobs stayed behind by virtue of a business line's retention, plus branch and commercial banking employees. In addition to the 10,000 (or however many) HQ jobs lost, you can say goodbye to about 6 or 7 law firm satellite offices (employing hundreds of attorneys), a considerable portion of the large accounting firm offices (hundreds of professionals), a glut of corporate real estate causing precipitous drops in prices per square foot, affecting not just the lessor-owners, but the restaurants, dry cleaners and caterers. It goes on and on. In addition to the bank jobs, the service providers (attorneys, accountants, consultants, etc.) are a huge part of our region's income base. Disproportionately so.

Charlotte had a phenomenal economy when NCNB was an up-and-coming regional, but (for what it's worth), it didn't have light rail, a Neiman Marcus, two professional sports venues downtown, a Maserati dealership, etc. that comes along with a Fortune 10 headquarters in an industry paying top-notch compensation to management. It goes without saying that South Park anchors and Italian sports car dealerships don't make great urban environments, etc., and that the focus of this website is intended to be urbanity, but let's not let urbanity become a red herring in this discussion. Life would change in a matter of months of a significant part of BofA relocated.

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^But there is no proof those things would not have come without BofA. I am not sure that a maserati dealership and neiman marcus are requirements for a great economy for most people living here or that BofA had much to do with it. BofA did not pay for the light rail. This of course is news I supposed to the people inside the downtown bubble, but I can't help to think that for example the 6500 people working at places like the Lowes HQ, it will make little difference other than something to talk about. There has always been money in Charlotte, lots of it, and its only recently in the city's history that a few employees of the banks have joined those ranks.

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Do you really think NYC is going to be minimally effected by this whole mess?

Yes, a lot more than minimally. 30,000 job losses is a big nut, especially when those employees are among the highest paid in the city. Supposedly 3 non financial industry jobs are indirectly created from every 1 financial industry job due to the multiplier effect. You do the math.

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I'll just throw another piece of "generally accepted" information among the 4 blocks around North Tryon regarding the low-cost center of IB in Charlotte v. the center of the IB universe (ignoring London), NYC. It's that projects like the Hearst trading floor, etc. have been a flop. Lower cost center be damned, the banks have had little success in attracting true investment banking ops to Charlotte for the simple reason it's not NYC. Recognizing the futility only sends more and more traditional IB functions back to NYC, where, between ML and BAC, there's massive commercial real estate capacity right now.

When investment banks were making a ton of money, it was easy to stay in NYC and pay 150% more for real estate excluding paying more for FTE's. But, that model did not work to well. I do not believe that Charlotte will become the center of the universe for IB but, when expenses are in the equation, you have to ask the question does it make sense to house functions in NYC that came be done elsewhere. A similar argument was made decades ago that auto manufacturing could only be done in Michigan/Ohio etc...However, the landscape has changed dramatically and there are numerous auto plants in the south.

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^But there is no proof those things would not have come without BofA. I am not sure that a maserati dealership and neiman marcus are requirements for a great economy for most people living here or that BofA had much to do with it. BofA did not pay for the light rail. This of course is news I supposed to the people inside the downtown bubble, but I can't help to think that for example the 6500 people working at places like the Lowes HQ, it will make little difference other than something to talk about. There has always been money in Charlotte, lots of it, and its only recently in the city's history that a few employees of the banks have joined those ranks.

Spot on, Monsoon. Let's start first with Foreign Cars Italia, the Maserati dealership. Is BofA the sole requirement to get those folks in here? Let's be serious -- call the GM over there on Independence and pretend you're with the Dupont Registry and are "interviewing him." As someone that knows him, he'll tell you that the predominance of his sales come from throughout the Southeast -- primarily from "ballers" as they say -- and that draws players from the Redskins, Falcons, Panthers, and many more. Charlotte's next closest dealer is here - in Charleston - 250 miles away. Ask Bill how many sales a month he makes from Charlotteans (or, PER MONTH for that matter, as it only a couple, 1-2 sales sometimes in any given month!)

As for Neiman Marcus - well, take a look at their website for example: Neiman Marcus Store Locator

They have three in NJ -- one of which is in Paramus (ugh) and another in ELIZABETH (yikes!!) Not exactly your paradigms for "high fashion" and high society, though close in proximity to a great deal of affluence.

As so astutely put by Tomas, a client and close friend of mine once said to me about eight years ago as he agitated about the "lack of high class shopping in Charlotte" -- he stated, "when I want to truly go shopping, I hop on a plane and either go to Miami and stay in my beachfront condo, or jet over to London and stay at my parent's flat there, shop on Sat and Sun and be back late night so as not to miss class at Charlotte Latin on Monday. THAT drives economic engines, not BofA employees in Charlotte -- and that kind of exteme wealth in CLT is what has brought such businesses into the Queen City in the first place. (and I have no doubt about Tomas' assertions, as I attended two of his overseas weekend shopping sessions and had a $28k AmEx bill afterwards!!)

Anyway, what we're doing here is merely schoolboy semantics, the real issue to be debating is the impending demise of Wachovia ... my sister is a broker who works on the trading floor of the nyse and says that has been the overwhelming chatter of the day, anyhow.

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Losing BofA would be disastrous for the Charlotte economy. The reason we have "high class retail" is because of wealth provided by specialized banking professionals, not back office jobs. Take Lowe's, for example. The Mooresville-based company has lost a great deal of talent to BofA and Wachovia because Lowe's still pays those jobs what they would have paid for them in North Wilkesboro. Not to disparage Wilkes County, but when you're trying to attract the best and brightest, it is by no means on anyone's radar. Employment packages (for at least five people I know who made the move from Lowe's to both banks) were substantially better (at least 20% better in all cases) in uptown than they were in Mount Mourne. Pay, vacation, bonuses, stock, and intangibles such as flexible work hours, access to transit, and the ability to work from home if they wanted. As much as people might hate the term "human capital", that's what it is. Having the HQ's of two large banks with highly skilled white collar labor provides a medium-sized city with wealth not seen in cities bigger than Charlotte. As someone else has already said, the sheer number of jobs that support headquartered bank operations are huge in number. Why would they need to be here if there was no HQ? What would they work on? Hugh McColl's whole reason for investing so heavily uptown was to attract workers who otherwise would have chosen to work in New York, Chicago or San Francisco. His drive was to develop an amenity-rich location so he could keep talented workers.

As to the loss of jobs from the recent layoffs, it's happened before and every single time, the banks still end up creating more jobs locally than they had the previous year(s). And as for Gateway Village, it is by no means empty of Bank of America employees. It is a single-tenant complex with the only empty space being ground-level retail that was given to Johnson and Wales.

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...... The reason we have "high class retail" is because of wealth provided by specialized banking professionals, not back office jobs. Take Lowe's, for example. .... Having the HQ's of two large banks with highly skilled white collar labor provides a medium-sized city with wealth not seen in cities bigger than Charlotte. ....

What high class retail? What unusual wealth? BTW, by almost any measure there is a higher standard of living in Raleigh, Charlotte's closest peer city in the Carolinas, yet they do so without a town full of "specialized banking professionals". Their real estate is worth more, they have a higher house hold income, and they even match Charlotte in per capita income. So I'm not seeing it. Also I can't imagine that anyone in Raleigh has less shopping options than that in Charlotte. Both cities trade off in "firsts" in what passes for, I guess, in trendy shopping.

The people with real wealth in Charlotte, people for example with helicopters at their homes on Lake Norman, did not do it by drawing an average BofA salary. I am fascinated by this notion however that Charlotte, Mecklenburg county and the metro revolve around BofA and Wachovia.

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Is the crux of your point that a loss is a gain to the city or that it wouldn't be as bad as conventional wisdom thinks? The city will not cease to exist if it were to lose one or both of the bank HQs, but at the margins, but the loss would obviously still be a loss. The loss would obviously be at the margins. That is in comparison to the marginal growth that the banks have contributed to over the decades.

Raleigh and the rest of the Triangle have lots of headquarters jobs in other industries, mostly in pharmaceutical companies which are experiencing a boom in profits in the past decade. They also have a lot of other drivers for upper middle class/professional jobs, just as the research institutions and universities. We have some headquarters outside the financial industry (although most of them are also struggling due to the economy), which will be unimpacted by the loss of the bank headquarters. However, the gross number of professional jobs in the city would be reduced, and with it, would come a marginal decrease in economic activity in the city.

Since none of us have actually done a study of the economic generation by the banks, we can look to the results of others that have. According to studies, the financial services industry contributes ~10% to our $100 billion gross local product. In the worst case scenario people are fretting over, most of that $10B GLP contribution would vanish. 10% is not 50%; 10% is not 90%.... but 10% is still 10% and a loss of that number to our economy would be dramatically felt. The symbolic losses would be higher, though, as the banks have defined this city symbolically for many of the people here. While that is not real, of course, its psychological could have unforeseen consequences on the decisions of others moving here.

I still don't think either bank will leave Charlotte, but I believe Wachovia will be considerably smaller after all this mess, and obviously Bank of America will be considerably larger. Bank of America has long been increasing its presence in NYC, but they also have a considerable presence in a lot of cities (count the cities where BofA has the tallest tower in the city, just as a symbolic measure.

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Is the crux of your point that a loss is a gain to the city or that it wouldn't be as bad as conventional wisdom thinks? ....

I was responding to the over the top claims that Charlotte's economy would be destroyed if BofA were to move its HQ and that people here would be left with shopping a Walmart because all the "high class" retailers would leave. If that is what is now considered "conventional wisdom" then is not very wise because there is nothing that I have seen that would indicate this would be the case. I suspect this wisdom is limited to those inside I-277, and it would no doubt hit that area pretty hard, but in regards to the Charlotte metro as a whole, or even just Meckenburg county, I would say it wouldn't have that big of an effect.

By the way, BofA is not the entire finance industry in Charlotte.

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"In the worst case scenario people are fretting over,..." = both banks leaving (which isn't going to happen)

"...most of that $10B" = not all, but a majority, because there are still smaller banks and regional centers and branches.

However, I do completely agree with you. It would not be catastrophic. The WORST CASE is only 10%, which is pretty much a confirmation of your point. However, my point is that a 10% decrease would still be significant damage to a city that has only grown for generations. Part of that 10% would include the multiplier effect from those jobs, and people were just giving random examples along those lines.

However, as for the impact to the 'inside 277' area, most of us posting here believe that uptown jobs have a major contributor the resurgence of urban life in Charlotte. Has been highly imperfect due to unfortunate trends in architecture, but the downtown job density and economic investment has been a significant contributor to applying the national trend to Charlotte for the rebirth of the pre-Depression neighborhoods in town. It has also provided an anchor district to drive growth in transit. But I guess I don't want to belabor each of these, as I suspect contrarian positions will be staked out on each.

For me, the bottom line is that the worst case WON'T happen, and I'm in full agreement that the worst case is not as tragic as most assume. But it would still be a significant blow to our economy and the symbolic story of our city. (The oversimplified symbolic story being: Scotch-Irish + gold = banktown).

.

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As a side to this, Wachovia may very well get a reprieve because the Bush Administration has apparently reversed itself and ordered the Treasury to toss $85B towards AIG. This was a reversal that took place about 24 hours after they said this kind of thing is over. It's an amazing amount of corporate welfare. To put just this number into perspective, $85B would build 113 Light Rail systems in the United States that cost the same as the Charlotte's proposed light rail extension to UNCC.

This brings the taxpayer liability up to $900B so far for this finance debacle. A debacle that was brought down on us by the likes of BofA, Wachovia, their subsidiaries, and the ones failing on wall street. Why is this important here? Because the pall this liability is going to burden working American with is also going to hurt the prospects of these banks from doing any kind of growing. I don't see how a consumer bank can grow when its customers are going to have to foot the bill of this kind of excess is being dumped right into the taxpayers pockets and its not over yet. BofA is now caught in the position of managing of the shrinking of a business. I don't see how this can be good for Charlotte especially if the claims made above, about the Charlotte economy revolving around Wachovia and BofA, are in fact true.

---------------------------

As another side to this complicated issue, a lawsuit was filed in NY State Supreme Ct. to stop the sale of ML to BofA. They contend the shareholders should have had a hand in making the decision to sell their company to BofA. If that isn't enough, another NY law firm says it is going to file a lawsuit BofA and ML because the price offered is not high enough. They contend about the defendants, "have clear and material conflicts of interest and are acting to better their own interests at the expense of Merrill public shareholders." It will be interesting to see how many more NY law firms are going to jump on this boat.

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