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Jon Talton

Analysis and commentary on economic news, trends and issues, with an emphasis on Seattle and the Northwest.

June 4, 2012 at 9:34 AM

The bullish fed to BofA shareholders in Merrill deal

Here’s a fresh reminder of the Obama’s administration’s failure to enforce the rule of law when it came to the big banks and Wall Street. The New York Times today reports that Bank of America management knew losses from acquiring Merrill Lynch would be astronomical — and they failed to disclose this to shareholders who voted for the deal:

Days before Bank of America shareholders approved the bank’s $50 billion purchase of Merrill Lynch in December 2008, top bank executives were advised that losses at the investment firm would most likely hammer the combined companies’ earnings in the years to come. But shareholders were not told about the looming losses, which would prompt a second taxpayer bailout of $20 billion, leaving them instead to rely on rosier projections from the bank that the deal would make money relatively soon after it was completed.

The only reason we know this now is that it has emerged in a civil suit. Attorney General Eric Holder, a high-powered corporate lawyer, and regulators have displayed little curiosity about this and other questionable deals (read Washington Mutual/JPMorgan Chase) handed out during the Great Panic.

This is worse than a failure of corporate governance. It is a failure marked by captured regulators, deregulation and crony capitalism. And they got away with it. Then BofA Chief Executive Ken Lewis retired with handsome compensation (more than $165 million over five years). The too-big-to-fail banks are bigger and more dangerous than ever, a point reinforced by JPMorgan’s multi-billion-dollar “trading” loss in London. Meanwhile, the trustee of MF Global is considering suing Jon Corzine, the former CEO, Democratic New Jersey governor and U.S. senator for the firm’s collapse. Why is Jon Corzine still at large, Mr. Attorney General?

And Don’t Miss: The five numbers you need to know from May’s jobs report || GOOD

Today’s Econ Haiku:

In Chesapeake’s bay

The sharks are now tasting blood

Icahn’s on the hunt

Comments | More in Bailout, Banking

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