In this whole bizarre mess, the price BofA is paying for Merrill is the most bizarre. Normally I can come up with some oddball potential explanation. But this one? Can’t do it. I’m mystified.
But I’m assuming it has some tie into saving BofA’s ass in the end. For example, if allowing Merrill to fail after Lehman failed then caused BofA to go down the tubes as a result (due to a lack of confidence in the system) then MAYBE BofA figured: “We’re the only party that can buy these clowns and we have to make it look like all of the clowns are worth something. Because if the clowns aren’t worth anything, then we’re not worth anything (even though we’re a money center bank – a higher caliber of clown than the investment banks). The illusion must be maintained that clowns are valuable. Therefore, we will use our stock (re: funny money) as a currency and buy Merrill at a premium to keep the illusion of value in tact… hopefully long enough to get us all out of the woods.”
That’s the best I can do. Totally weird.[/quote]
Your explanation sounds perfectly plausible in this environment.
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Actually, I feel stupid. Mike Shedlock came up with the (obvious and) most logical explanation for the BofA/Merrill pricing silliness:
“…there is one other possible explanation for this foolishness: [BofA’s] Lewis was in a mad rush to enhance his Ego. This merger (if it goes through) would create a behemoth that would rival Citigroup (C) in terms of assets under management. Lewis, in an impatient state did not care what he paid to achieve that fame.”
