Like deja vu all over again.

• Author: Gearino, G.D.
• Position: FINEPRINT

Old reality: Bank of America Corp. neither needed nor particularly wanted billions of dollars the federal government thrust into its hands a few months ago as bureaucrats sought to stanch the hemorrhaging of the economy. New reality: BofA not only needed that money after agreeing to acquire Merrill Lynch & Co., it needed billions more to cover the steaming piles of losses the Thundering Herd had left behind. Old reality: BofA not only got a legendary brokerage, it got the valuable services of Merrill chief John Thain, who would smooth the merger. New reality: Thain is a knucklehead who got the bum's rush for fiddling while Wall Street burned--presiding over losses worse than anyone at the bank imagined and ladling out lavish last-minute bonuses. Old reality: BofA chief Ken Lewis did all the things right that rival Wachovia Corp. CEO Ken Thompson did wrong. New reality: Merrill Lynch might end up doing to BofA what buying Golden West Financial Corp. did to Wachovia--saddle it with losses so huge that a once-proud giant ends up a ward of the state.

There are a couple of lessons here, the first being that the initial interpretation of events is rarely the definitive one. People in the news business like to think of themselves as compiling history's first, rough draft. The reality is that they, like the blind men of lore, are describing only the one part of the elephant that has revealed itself at that moment. It's a wise person who consumes the daily news report with that in mind. The second lesson is that even the smartest people can make themselves believe the mistakes of others don't apply to them. Elizabeth Taylor's seventh husband no doubt convinced himself that his marriage to the mercurial actress would be different from the rest. (It wasn't; they divorced.)

You have to wonder why Lewis would launch himself into the same waters where Wachovia foundered. In mid-2007, he engineered a $2 billion investment in Countrywide Financial Corp., an aggressive mortgage lender that already was feeling the effects of the housing slump. Six months later, BofA's stake in Countrywide was worth about a quarter of that. Lewis' response? BofA announced in January 2008 that it would buy the whole outfit, lock, stock and profit-leaking barrel--though the housing market was worse and Countrywide losing value so fast that the purchase price kept being recalculated downward. The deal closed just three days after Thompson was ushered out at Wachovia, largely on...