MERRILL Lynch was pivotal in the disastrous decision by Ireland's Finance Minister to guarantee its banks' debt, according to an expose of the financial crisis to be published this week.
The American investment bank, which underwrote Irish bonds, scotched a report by one analyst because it contained negative comments on the country's banks, according to the report in Vanity Fair.
Merrill retracted and then toned down the research note by Philip Ingram, which caused a sensation on the London markets when it was published in March 2008.
The bank also submitted a seven-page memo to Brian Lenihan and his Department of Finance, for €7m, in which it implied that a sensible option would be to guarantee the debts. In the memo, Merrill's investment bankers wrote that: "All of the Irish banks are profitable and well capitalised."
But the Vanity Fair article, due on Friday, claims: "It would have been difficult for Merrill Lynch's investment bankers not to know, at some level, that in a reckless market the Irish banks had acted with a recklessness all their own."
Ireland was forced into an euros €85bn European bailout in November after its banks were threatened with collapse following catastrophic property lending. The country had denied for months that it had a problem. The article is written by Michael Lewis, a former bond trader who described his experiences working at Salomon Brothers in a bestselling book Liar's Poker.
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Mr Lewis writes that Merrill fired Mr Ingram at the end of 2008 and that one of his colleagues, Ed Allchin, was "made to apologise to Merrill's investment bankers individually for the trouble he'd caused them by suggesting there was still money to be made on shorting Irish banks".
Merrill, now owned by Bank of America, did not return several calls seeking comment.
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