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Merrill Lynch Guys Got At Least One Thing Right

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Say what you want about them but they knew their Harry Potter references. And shouldn't that count for something?

Some Merrill Lynch & Co. traders had a dark departmental secret: They called it the “Voldemort Book,” says Greg Farrell in “Crash of the Titans.” “Like the villain in the Harry Potter stories, the mere mention of it was discouraged,” Farrell writes in his exhaustive and sometimes exhausting 471-page reconstruction of how Merrill sealed its own fate by becoming more bullish on bonuses than on America.

The “Voldemort Book” was a portfolio of more than $30 billion in “super senior” collateral debt obligations that Merrill accumulated on its balance sheet after investors began shunning toxic mortgage instruments in 2007, Farrell says. The Risk That Must Not Be Named triggered a chain of losses and writedowns that would end Merrill’s 94 years of independence, turn Bank of America Corp. into a temporary ward of the state, and wreck the careers of E. Stanley O’Neal and Kenneth D. Lewis.

Merrill's `Voldemort Book' Crushes O'Neal in Thriller on Crash [Bloomberg]