The First Of Many

Man, you just know this went on all over the place. And not just with Merrill, either. Bloomberg (02.01.08):

"Merrill Lynch & Co. agreed to pay Springfield, Massachusetts, $13.9 million to settle a dispute over collateralized debt obligations that tumbled in value.

The money will reimburse Springfield for the cost of the CDOs, securities tied to home loans and other debts shunned by investors as losses on subprime mortgages mounted."

Merrill to Repay Massachusetts City for CDO Purchase

"New York-based Merrill said it agreed to the refund after discovering the purchase was made without the city's consent."

More from the Boston Globe (02.01.08):

"Springfield invested about $50 million in cash-management accounts with Merrill Lynch starting in November of 2006. In the spring of 2007, $13.9 million of that was placed in the risky collateralized debt obligations - which are securities linked to bonds and loans, including subprime mortgages.

The Globe reported earlier this week that Merrill failed to inform the city that it had purchased the debt obligations until last July, when it suddenly changed the names of three investments on the city's monthly statement to indicate that they were CDOs."

Merrill to repay Springfield for losses

It appears that "(t)wo Merrill Lynch brokers in Albany used city cash funds to purchase the complex investments without telling Springfield officials".

Ooopsie.