MERRILL LYNCH IS LIKE "MISTAKE" McCAIN

Both LIE about themselves. Less than 2 weeks ago, the Merrill CEO said:

On a July 17 conference call, Thain said: "Right now we believe we are in a very comfortable spot in terms of our capital."

And what was the reality? Something far different:

Merrill to sell $8.5 bln stock after big write-down
Tue Jul 29, 2008 1:00pm EDT
By Christian Plumb and Jonathan Stempel

NEW YORK (Reuters) - Merrill Lynch & Co (MER.N: Quote, Profile, Research, Stock Buzz) said on Monday it will take a $5.7 billion third-quarter write-down as it unloads huge amounts of risky debt, and will raise $8.5 billion by selling new stock.

The Wall Street investment bank and brokerage announced its plans less than two weeks after posting a $4.9 billion second- quarter loss, hit by $9 billion of write-downs in that period.

In a sign of how toxic Merrill's debt holdings have become, it has agreed to sell $30.6 billion of collateralized debt obligations (CDOs), a kind of repackaged debt, to an affiliate of private equity fund Lone Star Funds, for just $6.7 billion, or about 22 cents on the dollar.

Here's the obvious conclusion:

"Are things that much worse than we were led to believe?" said James Ellman, president of Seacliff Capital in San Francisco. "If people were going to believe Thain when he said Merrill raised more capital than it needed to and had taken conservative marks on its securities book, I'm not sure they're going to believe him tomorrow morning."

William Smith, president of Smith Asset Management Inc in New York, said Merrill fetched a "horrendous" price for the CDOs in the sale announced on Monday. "The problem here is with Thain. You can throw him into the credibility problem camp now," Smith said.

This is even a straight forward sale because Merrill will put up 75% of the money to buy the crappy CDOs:

The Lone Star deal will result in a $4.4 billion write-down for Merrill and it will finance about 75 percent of the purchase price, Merrill said.