Merril Lynch and Good Money After Bad

Poor babies! Merril Lynch suffers a $10 billion dollar 4th quarter loss due to to the crash in the subprime mortage market (ML wrote down 14.6 billion dollars in investments). For years they were riding high on the profits of the real estate market bouyed by ever increasing Ponzi schemes and now the time has come to pay the piper. I can't feel sorry for these folk who painted themselves into their own corner. They must have known that things could not keep on going as they were forever. At some point there had to be a correction of sorts in the real estate market. And they must have known who would have been left holding the bag when all those over priced homes financed by increasingly gimmicky and risky mortgages started heading south.

Now,I am just some regular smuck who lives in a modest neighborhood. Over the last few years my eyes have just been bulging at the jump in prices of our humble shacks. I live in what many consider a starter neighborhood where typical prices are 1/2 million plus. Believe me, these houses on postage stamp lots are hardly worth it. But up to a couple of years ago people were lined up to buy them, outbidding each other while the finance and investment industries were right there to fan the flames of the situation. Even I, unsophisticated little ole me, knew that what goes up must come down.

I guess when you are flying high, making all those great commissions, denial of reality can become the norm. Everyone is doing it, right? Well, Merril Lynch looked great in those heady days, but now reality has come home to roost. The party is over and, oh, what a headache! It is not like everyone knows that drinking too much of the devil's brew has payback the day after. Hey, anybody got a hair-of-the-dog package of subprime loans they can spare?

Anyway, Merril Lynch just received an infusion of cash from foreign investors to help keep the ship from sinking ($12.8 billion since December). Since these guys at ML are such wizards at losing money, you just have to wonder what kind of snake oil they are selling now to convince these foreign investors that they are not just throwing their hard earned cash to the winds. I am sure that there were some good commissions made on that deal. Good money after bad? We'll see.