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Bank of America's $33 million, arm-twisting settlement
Posted By Michael Diamond On September 15, 2009 @ 10:59 am In Uncategorized | Comments Disabled
APP file photo: B of A CEO Ken Lewis on the left in 2006 announces $1 million donation to Rutgers. Which would be like a New Jersey resident with a net worth of $1 million donating 55 cents.
U.S. District Judge Jed Rakoff gave a gift to the plebes yesterday, when he rejected a settlement agreement between Bank of America and the Securities and Exchange Commission.
His ruling came after B of A agreed to pay the SEC $33 million to settle charges that it failed to disclose an important tidbit to shareholders when it was merging with Merrill Lynch. That tidbit? Merrill Lynch employees would get $3.6 billion in bonuses for 2008, a reward, apparently, for losing $27.6 billion that year. (That's a total of $3.6 billion. Not each. Although I can see how one might read it that way.)
Rakoff said the agreement "cannot remotely be called fair." He essentially urged the SEC – an agency that, like the FBI before 9-11, is under some big time pressure – to explain itself.
Indeed, while $33 million seems like a lot, B of A has $1.8 trillion in assets. Which would be like fining a New Jersey resident with a net worth of $1 million…geez, my calculator doesn't have enough space for trillions, give me one second here cause I think my computer has a calculator on it, oh yeah, here it is…$18.33.
Now, you know and I know that even if shareholders had known about Merrill Lynch's bonuses in the pipeline, there is not a chance in the world it would have made a lick of difference. And an analyst told the New York Times that the merger turned out to be a windfall for shareholders [1]anyway.
But a year after Lehman Brothers failed and the economy went into a tailspin, we have all watched from the sidelines as the government rushed in to save Wall Street and rebuild the same system that existed. And we've seen that the process, as Rakoff said of the B of A settlement, cannot remotely be called fair.
It was like the bully hurt his hand after punching us in the face. And the paramedics came rushing in to treat the bully, while overlooking the fact that we were bleeding. "Ok, boys, our job is done here. Let's move on. Health care, everyone!"
Hyperbolic, you say? Maybe. But B of A agreed to the $33 million fine, (I would have loved to have watched the handshakes after that deal was struck) and turned around and started raising credit card interest rates on customers such as this woman [2], who told B of A she's not paying and is calling for a debtor's revolution. (This video has been rated PG-13 by the YouTube Picture Association.)
B of A isn't alone. JP Morgan Chase made a big to-do about paying back $25 billion that the Treasury Department invested in it to shore up its balance sheet. The company said [3]it didn't need the money. And now, it was suddenly free of government restrictions on executive pay. How did it celebrate? By raising the minimum monthly payment on some of its credit card customers, forcing them into default. [4]
Why didn't B of A and JP Morgan use the Treasury Department capital to help give its customers a break? I'm sure there are very good business reasons for it. But none of them are fair.
Article printed from In The Money: http://blogs.app.com/inthemoney
URL to article: http://blogs.app.com/inthemoney/2009/09/15/bank-of-americas-33-million-arm-twisting-settlement/
[1] a windfall for shareholders : http://www.nytimes.com/2009/09/15/business/15bank.html?_r=1&hpw
[2] this woman: http://www.youtube.com/watch?v=jGC1mCS4OVo
[3] The company said : http://online.wsj.com/article/SB123986615199224399.html
[4] By raising the minimum monthly payment on some of its credit card customers, forcing them into default.: http://www.app.com/article/20090826/BUSINESS/908260345/1003/rss08
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