Merrill Lynch had its eyes on Goldman Sach's savvy use of its balance sheet when the firm plunged disastrously into the CDO and subprime markets, according to an in-depth look by Fortune. Goldman's game was more risky, and Merrill followed suit. The story behind the story was that it was having trouble selling the top-rated, senior-most tranches of CDOs that its was creating. Yields had fallen to the point that hedge funds and other investors were no longer buying. So to keep the CDO profits humming, Merrill decided to buy the bonds themselves. And that came back to bite the firm hard. In hindsight, it seems so reckless. But you have to think that when you decide to make your money via risk management, this is bound to happen at some point.  

For more:
- here's the Fortune article [1]

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