It was just over 3 months ago that Merrill Lynch CEO John Thain told Spain's El Pais newspaper that his firm had tackled its biggest problems. The deteriorating credit situation, however, makes it look as if that call was made a little too early, and Thain and his executive crew now have some big decisions to make.

Somewhat rashly (so it looks now), Thain told the newspaper: 'We have carried out an enormous cleaning of our credit portfolio. We have more capital than we need, so we can say to the market that we don't need more injections. We can confirm that we have tackled that problem'.

And most of the market agreed with Thain at the time he was interviewed. But things have taken a turn for the worse since then, and the smart money now expects Merrill to writedowns between $3 - $5bn in the second-quarter, turning what most thought would be a small loss for the period into a loss of up to $3bn. And, according to The Financial Times, Thain has until mid-July (when Merrill posts its Q2 results) to decide if he wants to sell the firm's stake in Bloomberg or BlackRock to beef up the balance sheet. Bloomberg has first option on Merrill's stake, which is thought to be worth up to $6bn, and BlackRock, one of the few organizations to come out of the credit crunch well, might be persuaded to buy Merrill's 49.8% stake in its business for possibly $10bn.

In other news, The New York Times reports that Ralph Cioffi and Matthew Tannin, the two Bear Stearns hedge fund managers charged by US federal prosecutors for deceiving investors, may now been charged with misleading the banks that backed the funds too. Investigators are said to have begun questioning employees at Bank of America, Barclays and Merrill Lynch to try and ascertain if any misleading statements were made to bag funds.

Finally, Reuters reports that Zhao Danyang, the general manager of Pure Heart China Growth Investment Fund, paid $2.11m last week for the privilege of having lunch with Warren Buffett - more than triple last year's winning bid in the annual eBay charity auction.

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