Studying all this there is much more than seems to meet the eye. I don't have answers just speculative thoughts.
1) BAC buys MER for $29 a share. Are you kidding me? BAC can't be that stupid. They could have had the company at $5 in a week. At the very least MER had no bargaining power to get near a 50% premium. The whole thing is illogical. The deal doesn't close for 3 to 4 months. Some of kind of agreement behind the scenes the merger never goes through? Some kind of agreement behind the scenes of a FED backstop? An agreement to burn the shorts? An agreement to re-capitalize the balance sheet once MER surges, its cds collapses? Heard through friends that MER investment bankers have been at the office all weekend working on this deal but have no idea what the colleagues are working on. That is very unusual. The whole thing seems to be a gigantic mirage in some form or fashion.
2) The FED takes on equity as collateral? At the same time the banks announce a $70 billion liquidity fund? These banks have access to a FED window with increase auction limits and expanded assets. Some of this money could end up in Lehman to ensure an orderly bankruptcy.
3) The FED knows in the their back pocket they can cut rates on Tuesday.
4) Rumors of SEC change in short rules again.
There is alot that has not come to light. Some of it we may not know about until after November and the election.