On the plaza behind Merrill Lynch's headquarters last week, an investment banker laid off this spring waited to meet a former colleague. On an otherwise pleasant autumn-like day, with a view of the Statue of Liberty in the distance, he was there to provide “grief counseling” after Bank of America's stunning purchase of the Wall Street icon.
A luxury car show had taken over the plaza. Browsers seemed scarce, although there was a “Sold” ticket on an Aston Martin with a suggested price of $265,000 – “absurd,” the banker said. The surreal scene was oddly fitting during a week that saw carnage in financial markets and the Charlotte bank's $50 billion takeover of Merrill Lynch.
If New York had missed the Charlotte bank's growth into a financial titan, chief executive Ken Lewis' purchase of Merrill Lynch extinguished any lingering doubts about the ascendancy of a one-time small Southern bank into a major player in the Big Apple and on the global banking scene.
The deal would create the nation's No. 1 bank by assets and make Bank of America, already the biggest consumer bank, a dominant player in traditional Wall Street investment banking and brokerage businesses.
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Lewis has said the headquarters will remain in Charlotte. But the bank's growing status in the nation's financial center was already symbolized by a Midtown skyscraper that opened this year and the array of red-signed bank branches brightening corners from Harlem to downtown. The bank now has more than 5,000 employees in New York, while Merrill has about 9,500 in the city.
Lewis and Bank of America have been lionized as winners in the nation's financial crisis, but major challenges lie ahead. The bank needs to meld disparate cultures in an uncertain economy that's causing rising losses in its loan portfolio. The deal also needs approvals from various regulators and shareholders.
While some at “Mother Merrill” worried last week about job cuts and the loss of a culture built over 94 years, others were more pragmatic in light of the financial system's disarray. Among the firm's rivals, Lehman Brothers was already in bankruptcy court and Morgan Stanley would launch a search for a possible merger partner among banks including Charlotte's Wachovia.
“They probably saved us,” said one Merrill employee, who, like his colleagues, didn't want his name used.
A story about Carolina Panthers owner Jerry Richardson and Lewis' predecessor, Hugh McColl Jr., crystallizes the rise of the Charlotte bank.
In the 1960s, Richardson needed a $300,000 loan to expand his Hardee's restaurant franchise, so he went to New York to get financing, bringing along his pal McColl for advice. A banker there wanted 40 percent of the company in exchange for the loan. Richardson “stood up, and I said, ‘C'mon, let's go, I'll lend you the money,'” McColl said in an interview last week.
He said the bank long had an ambition to be the biggest player in its part of the country and achieved that – going coast-to-coast, in fact, before McColl retired in 2001. Lewis has taken it to another level. He's forged more than $150 billion in deals, expanding the bank into the Northeast, gobbling up leaders in credit cards and mortgages and now taking on Wall Street.
When he returned home from New York after sealing the Merrill deal, Lewis had a congratulatory message waiting from his former boss. “It's been an evolution,” McColl said. “Certainly Ken has done a remarkable job.”
Lewis, 61, has presided over the tide of bank branches that has swept the city in recent years. Once a junior banker based in New York, the Mississippi native and company lifer announced plans to build the Midtown tower shortly after the Sept. 11 terrorist attacks.
The sleek 54-story tower near Times Square is still under construction – falling glass caused a brief street closure last week – but 3,300 employees, mostly in the corporate and investment bank, are already at work. By next spring, about 5,000 employees will be based in the building. Floor-to-ceiling windows offer views of the Hudson River on one side and Bryant Park on the other. In the base, two buzzing trading floors house traders searching their terminal screens for ways to weather financial market chaos.
And in perhaps the most fitting sign of the bank's new day in New York, the tower's auditorium hosted the news conference where Lewis and Merrill CEO John Thain formally announced their companies' union.
While Bank of America's tower is steps away from the glitzy consumerism of Times Square, Merrill Lynch's headquarters is ensconced in downtown, part of the World Financial Center that overlooks the sobering chasm that is Ground Zero.
At a restaurant at the base of the Merrill tower, the takeover news was rippling through lunchtime conversations. General manager Melonee Gilchrist said the firm's investment bankers were taking the news as expected. “They're drinking,” she said.
Employees are now worried about what happens next. Bank of America plans to slash $7 billion in costs in the deal, which will include undisclosed job cuts that could range from back-office positions in New Jersey to investment banking jobs in Charlotte. “I'm hopeful I'll have a job,” said a Merrill administrative assistant. “I love working at Merrill.”
Others talked about the importance of keeping the firm's culture, represented by the “Merrill Lynch Principles” posted at the main entrance. Bank of America has said it will keep the Merrill name for the combined brokerage, but it still faces doubters about its new place among Wall Street's elite.
Bank of America “is a commercial bank that owns an investment bank,” said the laid-off banker meeting a colleague. “ This is a real investment bank. It's a big difference.”