In July, Merrill Lynch reported a solid second quarter. Profit was up 31 percent over the previous year and essentially flat from the prior quarter. The chief executive, E. Stanley O'Neal, sent a memorandum to employees outlining risks he saw in the economy and praising performance.
"More than anything else," Mr. O'Neal wrote, "the quarter reflected the benefits of a simple but critical fact: we go about managing risk and market activity every day at this company."
Every day, it seems, except the really bad days. Last week, risk management hit Merrill in the bottom line. The bank announced that it would take a $5 billion write-down and expected a loss of 50 cents a share in the quarter.