BofA Involved in Merrill Markdowns: Report

Bank of America was directly involved in markdowns that contributed to Merrill Lynch's loss of $15.3 billion in the fourth quarter, a report says.
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Bank of America

(BAC) - Get Report

was directly involved in markdowns that contributed to

Merrill Lynch's

loss of $15.3 billion in the fourth quarter of 2008, the

Financial Times

reports, citing sources familiar with the matter.

The fourth quarter was Merrill's last reporting period before it was acquired by Bank of America on Jan. 1. Bank of America requested more federal aid after it learned of the massive losses linked to the investment bank.

Sources tell the

Financial Times

that Neil Cotty, BofA's chief accounting officer, played an active role in preparing accounts. With Cotty's involvement in December, Merrill took a fourth-quarter writedown of $1.9 billion in leveraged loans and a $2.9 billion reserve against an exposure to derivatives linked to asset-backed securities. He also gave his OK to a $1 billion writedown of credit default swaps involving investment grade companies, the newspaper reports.


Financial Times

reports Cotty, in a statement issued by Bank of America, said: "While BofA had access to Merrill's financial information in the fourth quarter and had input into many accounting policy and valuation issues, Merrill management was responsible for these decisions regarding the marks and other valuations."

Meanwhile, New York Attorney General Andrew Cuomo received the identities Thursday of the 200 highest-paid bonus recipients at Merrill Lynch prior to the merger, the

Wall Street Journal


Cuomo is investigating whether Bank of America and Merrill failed to provide proper disclosures to shareholders about the bonuses, which are valued at about $3.6 billion.

The delivery of names followed an order Wednesday from New York State Supreme Court Justice Bernard Fried denying Bank of America's request that such details be kept confidential.

A Bank of America spokesman said the company would "continue to cooperate with the attorney general of New York," the



Also on Thursday, Cuomo's office also received a list of

American International Group

(AIG) - Get Report

employees who received a total of $165 million in retention bonuses.

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