ML’s Philip Ingram, who is described in his late 20s and a bit quirky, discarded the positive PR spin put forward by Ireland’s Big Three banks—Anglo Irish, Bank of Ireland and Allied Irish Banks—and discussed their practices to insiders in the commercial property market. They warned him that Ireland’s bankers were making far riskier loans in Ireland than they were in the U.K. and were simply considered the “nuttiest lenders around.”
Ingram published his report in March `08, quoting verbatim what insiders told him about loans made to the real estate sector. Within a few hours, Ingram’s report “was the hottest read in the London financial markets, until Merrill retracted it,” wrote Lewis, author of “Liar’s Poker” and “Moneyball.”
He notes that Merrill was lead underwriter of Anglo Irish’s bonds and corporate broker to AIB, earning “huge sums of money off the growth of Irish banking.”
The banks loudly complained to Merrill about Ingram’s report and his superiors “hauled him into meetings with in-house lawyers, who toned down the report’s pointed language and purged it of its damning quotes from market insiders, including its many references to Irish banks,” wrote Lewis, VF’s contributing editor. Everything “Ingram wrote about Irish banks was edited, and bowdlerized by ML’s lawyers.” Merrill fired Ingram at the end of `08. A ML staffer apologized to the company’s investment banking team for the trouble that Ingram caused them.
ML went on to write a report for Ireland’s Finance Dept, in which it said all of the Irish banks are profitable and well-capitalized. It suggested that the problem was not in bad loans but panic in the market. The Irish taxpayers shelled out 7M euros to Merrill for the report.
The PR department of Bank of America, which now owns ML, declined comment about the Vanity Fair article.
Henry Blodget, former ML analyst who now operates “The Business Insider,” said in his blog Feb. 14 that ML’s lawyers did not “muzzle” Ingram or change his opinion about the Irish banks.
He says they “did sanitize his original report and make it less vivid and startling and buried his conclusion. But this sanitization did not alter the fundamental conclusion of Ingram’s survey—which still said that the Irish banks had very risky lending practices.”
Another criticism of Ingram was that his report had a number of unattributed quotes which is unacceptable practice in such reports.
Critics of the Lewis story also said that Ingram was a junior researcher and was fired when ML cut about a quarter of its research staff in that area. He was not replaced with anyone from Bank of America, which purchased ML, nor was he fired because of the report, critics said.
Blodget was accused of fraud by Attorney General Eliot Spitzer who said Blodget’s written research did not reflect his “true opinions” about the stocks he was covering.
He paid a $2 million fine and $2M for “disgorgement” and was banned from the securities industry in 2003.