# Many lives of Merrill?

Like Hemmingway, Merrill Lynch has read its obituary many times in the paper. This time it is no different. Many (who?) are predicting the demise of the brokerage giant again, thanks largely to actions of Eliot Spitzer, the New York attorney general with gubernatorial aspirations. But like the illustrious writer, the big Bull will survive.

Armed with internal emails which referred to some Internet stocks as ¶crap¾ even as its analysts were touting them to hoi-polloi, the fire-brand attorney in late April 2002, brow beat into changing its disclosure policies and way it rates some of its stocks. Mr. Spitzer has forced Merrill to reveal the potential conflicts of interest between its stock analysts and its investment banking department. Apparently a $100 million dollar settlement is in the works as well. In New York political circles the tongues are wagging about how Mr. Spitzer is taking a page out of former Mayor Rudolph Giuliani’s book. Mr. Giuliani, then a US attorney, went after Wall Street for insider trading, and thus launched a successful political career. In the wake of recent accounting scandals and dot-com blow-up, Mr. Spitzer is positioning himself as a hero for small investor. Mr. Spitzer says that Merrill’s stock ratings were ¶biased and distorted¾ in an attempt to secure and maintain lucrative contracts for investment banking services. As a result, the firm often disseminated misleading information that helped its corporate clients but harmed individual investors. “This was a shocking betrayal of trust by one of Wall Street’s most trusted names,” Mr. Spitzer said. It makes for interesting reading, but the news is old and the action is too little too late. Merrill, which was a little late to the technology party (after Credit Suisse First Boston, Goldman Sachs, and Morgan Stanley) a Johnny-come-lately to the technology bubble has been retreating from the business which seems to have landed it in trouble. For example, it has scaled down its Silicon Valley operations, according to Investment Dealers Digest. Henry Blodget, the dot-com analyst who has been the focus on much of Mr. Spitzer’s investigation is already tarnished goods on Wall Street. Its share of the initial public offerings and convertible bond offerings for technology and telecom companies has vaporized over past 15 months, according to data collected by Dealogic, a London-based research group. At the height of the bubble, Merrill came in second in convertible bonds issuance with about 25 percent in 1999 of the total market, and this increased to 31.6 percent in 2000 and about 20% in 2001. So far this year, Merrill’s share of the total telecom and technology convertible business is less than a percent. The numbers were no different for initial public offerings is no different ? 17.6 percent in 1999, 8.1 percent in 2000, and virtually none in 2001 and so far this year. It’s difficult to see Mr. Spitzer’s crusade having much of an influence in an IPO market that’s nonexistentóóóis nothing more than a public relations nightmare. For those of you who are history buffs, here is a little reminder. Back in 1985 when Merrill Lynch wanted to break into mortgage trading business, it decided to lure away Howie Rubin, then a two-year-veteran of Salomon Brothers’ mortgage desk by offering him a$1 million a year for three year deal. In the late 1990s when the dot-madness was sweeping the nation, the company decided it was time to hire another almost rookie, Henry Blodget for \$TK million a year, and break into the dot-com and technology business in a big way. In both incidents the market bubble burst, but Merrill moved on to other things. This time will be no different, isn’t that right Mr. Hemmingway