Bank of America proudly announced that it would buy Merrill Lynch for $46 billion in Sep 2008. Today, its market cap is $38 billion.

Bank of America’s CEO Ken Lewis had dreams about buying investment banks and asset management companies. He jumped at the opportunity of buying Merrill Lynch just because of that. He also shot himself in his foot.

Today, it’s clear that Bank of America didn’t do proper due diligence. The bank suffered heavy losses due to the losses in Merrill Lynch. Bank of America knew about these losses after December 5, 2008 shareholder vote to approve the deal to buy Merrill Lynch. But, it didn’t disclose the losses before closing the deal on Jan 1, 2009. Bank’s investors are furious about the lack of transparency.

Bank of America was secretly negotiating with Fed officials for more bailout money because of the mounting losses in Merrill Lynch. Investors are kept in dark for the whole time. Today, Bank of America received emergency capital injection of $20 billion from Fed. There may be more capital injections in the future. I think it’s better to stay away from bank stocks until we know everything about what is really going on with these guys.