It was not until summer 2008 that we got appropriately skeptical reporting of any volume, and this only after hideous results sent the stock into a freefall. BusinessWeek offered some badly needed reality in a July 15 piece that asked “How Bad Is It?”:

Poor Merrill Lynch (MER). Was it only three months ago that investors were buying shares of the nation’s third-largest broker ahead of its first-quarter earnings announcement? Not this time around. Since the beginning of May, Merrill’s stock has dropped 45%—and touched a nine-year low of 26.50 on July 11, as investors continued to pound the stock in the days leading up to the company’s July 17 earnings release.

What has changed? Back then, optimistic investors hoped the worst was over. Now, they know it’s not.

Indeed, the second quarter results did force a re-evaluation of what had been largely unquestioned optimism about Thain—although the degree of re-evaluation varied from piece to piece and, this is the key point, by no means represented a seismic shift. Listen, with what we knew at that point about subprime and the toxic crud it was made into, a properly skeptical financial press would have dropped the deference thing by now.

The FT admitted that the results were “a setback for John Thain.” The WSJ, with phrasing that doesn’t quite blame Thain himself, noted:

The past continues to haunt Merrill Lynch & Co. Chairman and Chief Executive John Thain.

And the NYT observed the differences between the expectations for and the results of Thain’s Merrill tenure, the “comedown” as the Times story puts it.

But Thain is still surprisingly unscathed, because the press in general continued to take him at his word even though he had already failed in his main task: to properly assess and candidly disclose the extent of the problem left by a predecessor.

David Weidner, at Dow Jones, was ahead of the pack when he drew the conclusion July 22 that “Thain Should Shoulder Some Blame at Merrill.” It would be several months until this idea, which was right, really took hold.

The FT, on the other hand, took a common tack July 30, when it noted that

while more writedowns may lie in store, the general view is that Mr. Thain has taken an embarrassing but necessary step in the right direction.

And yet again Thain took his case to the media. The NYT reported that “John Thain said he had to do something to stop the bleeding at Merrill Lynch.” And while he was at it, he “disputed the notions that he misled investors about his intentions to raise capital.” He elaborated in an August 18 BusinessWeek interview. And he still managed to earn positive reviews from the WSJ September 12.

When news of Bank of America’s takeover of Merrill came in mid-September, many news outlets wrote as though straw had been spun into gold. Here, for example, is the lede of a September 15 Washington Post story:

Bank of America struck a $50 billion deal yesterday to buy Merrill Lynch, a merger that will unite the nation’s largest consumer bank with one of its most celebrated investment banking firms, according to sources familiar with the negotiations.

Celebrated? That had never been true, and now?

In a similar vein, The Globe and Mail informed us September 16:

In less than 48 hours, Mr. Lewis had transformed Bank of America from a big retail bank in the United States into a global financial powerhouse.

Powerhouse? Remember, this is the fall of 2008.

The NYT was more cautious, but even it couldn’t help observing that “the purchase of Merrill puts [B of A] at the pinnacle of American finance, making it the biggest brokerage house and consumer banking franchise.”

Pinnacle?

The WSJ even suggested Thain to head a new Treasury Resolution Trust Corp., as Thain’s name also floated around both as the possible successor to Ken Lewis at B of A, where he had been appointed head of global banking, securities and wealth management, and as a possible McCain Treasury secretary. Can you imagine? By December, the WSJ offered plaudits to both Thain and Lewis.

Elinore Longobardi is a Fellow and staff writer of The Audit, the business-press section of Columbia Journalism Review.