Today, a Congressional panel presented documents indicating that Bank of America's management knew that Merrill Lynch had deep losses, but failed to inform shareholders prior to the merger's approval vote. This debate about whether management knew this has been heated. Frankly, I've always assumed that they knew. Merrill Lynch would have had to successfully engage in some serious and sophisticated fraud to prevent BOA's management from gaining such knowledge, unless BOA's due diligence team was truly inept. I just figure that BOA's management didn't much care.

First, I should back up. Clearly it does matter if BOA management knew this information and withheld it from shareholders. That's bad. And some concrete evidence appears to be materializing. Here's one such document, via Reuters reporting:

On Tuesday, for example, the committee disclosed one handwritten note from an outside lawyer, dated November 12, 2008, that said Merrill "lost $7 billion in October."

Of course, unless BOA's management is truly clueless, the mere fact that it was being coerced into the purchase -- which it claims it was -- should be indication enough that Merrill had very serious problems. After all, if it wasn't purchased by BOA, it would have gone the way of Lehman.

So I think it's virtually trivial that management must have known that there were grave problems at Merrill. But why wouldn't they have provided shareholders with full disclosure? I think that management wasn't that concerned with Merrill's losses.

I know that sounds crazy, because losses matter. But management probably thought that the immediate pain that the Merrill's losses would cause was minor compared to the ultimate benefit that Merrill could bring to BOA. This acquisition was not a short-term play: the long-term was clearly what mattered.

That doesn't excuse management for keeping this information from shareholders. But, instead, it shows they should have approached the merger vote differently. This information should have been provided, but the long-run benefit should have been more loudly touted, so to drown out the shareholders whining about the initial damage it would cause.