The World of Banking - Never a Boring Day!

Bank of America (BofA) entered into an agreement to purchase Merrill Lynch about a year ago. Merrill, with the knowledge of Bank of America executives, paid Merrill employees $3.6 billion in bonuses just before the deal closed on Jan. 1, 2009. When attempting to buy Merrill Lynch, BofA told shareholders that Merrill would not pay year end bonuses without BofA’s consent. What BofA did not share with their shareholders, at least according to The Securities and Exchange Commission (SEC), is that BofA had already authorized Merrill to pay up to $5.8 billion in year end bonuses.

Merrill lost $27.6 billion last year, which obviously impacted the earnings at BofA, not to mention that Bank of America was one of the largest recipients of government bail out money aka TARP funds. This type behavior is infuriating. So many of us in the banking industry are taking the heat, taking pay cuts, or losing our jobs, because of this type dishonest, immoral activity.

The SEC and BofA had reached a settlement agreement of $33 million dollars. Federal judge Jed Rakoff gave this proposed settlement a big no go today, Sept. 14, 2009. Rakoff said this settlement was unacceptable. It allowed the SEC to act as if they had exposed the bad guys, BofA, and allowed BofA to act as if they had been “coerced into an onerous settlement by overzealous regulators. And all this is done at the expense, not only of the shareholders, but also of the truth." Rakoff also wants the SEC to explain why they are not attempting to press charges against BofA executives. Good for Rakoff! This is unchartered water in the legal arena, but I am so glad that this judge is calling bullshit – it is about time.

In a separate court proceeding, New York Attorney General Andrew Cuomo's office is preparing to file charges against these BofA executives, as they failed to provide full disclosure in their purchase of Merrill Lynch.

These executives should be held accountable. It would appear they could certainly use any “reform” prison can offer.

References:

Bernard, Stephen. “Judge Overturns Bank of America-SEC Settlement of Merrill
Bonuses.” The Huffington Post. 14 Sept. 2009. Viewed 14 Sept. 2009. http://www.huffingtonpost.com/2009/09/14/judge-overturns-bank-of-a_n_285947.html.