"Dogged by shareholder lawsuits and by multiple law-enforcement investigations into his bank's ill-fated merger with Merrill Lynch [ML], [BofA] CEO Ken Lewis announced on Sept. 30 that he would leave his post by the end of the year. ... At the root of Lewis's woes is a merger that more closely resembles a shotgun wedding. [BofA] negotiated a hasty takeover agreenment with [ML] over the course of a single September weekend following the shocking collapse of Lehman Brothers. Treasury Secretary Hank Paulson aggressively championed the deal as integral to his effort to stem the rising financial crisis. ... Merrill's staggering losses required [BofA] to accept a $20 billion infusion of additonal federal cash immediately following the merger., and [BofA] shares now trade at a fraction of their former value. ... The numerous civil complaints say that Lewis sold out their interests by saddling them with a disproportionate share of the cost of rescuing the world economy at the behest of bureaucrats in Washington. ... But the events surrounding the merger indicate that Paulson and Bernanke may have placed improper pressure on Lewis to disregard his duties to his shareholders. If that is true, then Lewis looks less like a criminal than like the hapless pawn of top government regulators determioned to stem the crisis at any cost. ... Lewis clarified that Paulson did not want the government to be required to disclose that it was committing additional TARP funds to bail out [BofA] until after the merger with Merrill had taken place. ... [BofA's] shareholders were surely shortchanged in the merger, but was Lewis criminally responsible, or was he punk'd by a duo of super-regulators determined to control the fate of [BofA] by installing a whole new management team, if necessary? The latter seems likely. ... In reality, a former Trasury secretary and a cerrent [Fed] chairman are unlikely to be indicted for cormers they cut in their efforts to stave off the collapse of the financial system. ... But letting Paulson and Bernanke off the hook will only redouble the determination of politicos and shareholders to exact punishment on the only remaining culprit. ... Courts have also recognized a second defense that might apply to Lewis: a defendant's reasonable belief that a government official had exempted his conduct from the law may negate the required mens rea, or ciminal intent, needed for convicton. ... To prosecute Lewis while giving Paulson and Bernanke a free pass would send an even worse signal: that the government will take care of its own, and that politicians will find their scapegoats among those who attempt to run productive enterprises rather than those who regulate them", Marie Gryphon at National Review, 7 October 2009, link: http://article.nationalreview.com/print/?q=ODdiMmNjNzJiYTQ2MmI3NjgyMjYxYTZkND1jNjVkMTQ=Q.
"The Treasury Department's pay czar pushed outgoing [BofA] Chief Executive Kenneth D. Lewis into giving back about $1 million he received so far this year and forgoing the rest of his $1.5 million salary for 2009, say people familar with the matter. ... Kenneth ... Feinberg pushed for the deal because he thought the package of retirement benefits and unvested stock Mr. Lewis takes with him when he steps down at year's end--currently worth at least $69.3 million, according to securities filings--was large enough and possibly too big. ... Thursday's decision caps a rocky relationship between Mr. Lewis and the US government", Deborah Solomon and Dan Fitzpatrick at the WSJ, 16 October 2009, link: http://online.wsj.com/article/SB125564137421788337.html.
This is the way it looks to me.
Is it a coincidence that Feinberg "sticks up" Lewis on the same day GSG announces $16.71 billion in bonuses? Is this a federal "head fake"? Lloyd Blankfein has 3,354,836 GSG shares worth $621 million at $184.96 each. Why doesn't Feinberg TELL Blankfein "You will donate the proceeds of the sale of these shares to the Treasury? Won't you"? See my 6 September 2009 post: http://skepticaltexascpa.blogspot.com/2009/09/goldman-speaks.html.
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They just ordered Bernard Kerik to jail.
Former New York City Police Commissioner Bernard Kerik was jailed on Tuesday when a federal judge revoked his bail a week before his trial on conspiracy and fraud charges was due to begin.
The judge agreed to a request to jail Kerik for leaking sealed information to a legal defense fund-raiser -- information the fund-raiser shared with the Washington Times newspaper.
I wonder what would happen to Ken Lewis in jail? Look how tough the judges are getting... not so nice for white collar indiscretions anymore...
Although Wachovia made mistakes, it could have been saved as were many Wall Street firms, by Paulson, a former Goldman Sachs banker. While Wachovia was left dangling in the wind, Paulson tried to get it to sell out to CitiBank to save Citi’s hide with an injection of assets from Wachovia. But Wells Fargo foiled those plans and offered seven times what Citi offered, much to Wall Street’s consternation. Wachovia’s fall could have been avoided if the Feds had just waited a week or so when plans to help banks survive the financial monsoon were launched. Pushed by Wall Street, however, the feds let it fail, just in a different way than it let Lehman fail. The effect on Charlotte has been devastating and undeserved.
Additionally, on the subject of BofA’s and Ken Lewis’s competence and lack of culpability over the last year or so: He is a great banker—indeed a legendary one. And Bank of America was a great bank—until the government forced it to help bail out Wall Street by buying Merrill Lynch.
Lately, people have been taking Ken Lewis to task time and again. BofA was a “good bank” before Paulson and Geitner took control of it. Many now vilify Ken Lewis, when in actuality; Bank of America was a very strong, well-managed bank before the former Goldman banker, Paulson, forced Lewis to inject BofA's capital into Merrill by buying it. Lewis’s major fault was naively allowing himself to get manipulated by Paulson and Geitner, and then not publically calling their hand to defend himself and his bank from the financial blackmail tactics of the feds and Wall Street.
Paulson was looking for ways to raid BofA's capital account any way he could to save Wall Street firms, as he had tried earlier by suggesting BofA buy Lehman… and that first time Lewis said "no". So next time, Paulson made Lewis take a deal he couldn’t refuse. Paulson threatened BofA with executive and Board dismissal if the Merrill deal wasn't done. Now, regulators have forced BofA to make those changes anyway, and replace legacy BofA Board members with others possessing more ties to Wall Street. The last chapter of that part of the story will soon be written upon Lewis’s retirement.
Now regulators want to reduce Lewis’s executive pay with their power to make BofA take taxpayer money against his will to cushion the Merrill deal they forced upon Lewis. So the Merrill execs, and their bonuses, were saved, and much of BofA's capital has in effect been confiscated by Wall Street bankers. That theft will be complete if after the new BofA CEO is named, the now-Wall Street controlled BofA Board moves its headquarters and executive payroll to New York. Along with it will go many more lower-level jobs in and outside of banking that will further damage Charlotte for Wall Street’s benefit.
Vilify Lewis? Why not vilify Wall Street favorites Paulson and Geitner; NY judge Rakoff, who has strong ties to Wall Street banks through his former law firm; NY Attorney General Cuomo; and NY congressman Towns. They and others are participating in unfairly making BofA and Lewis into media targets and scapegoats. By doing so they are also displacing some blame for the NY-made, world-wide financial debacle while diverting attention to their ongoing actions --- some of which are aimed at taking control of BofA assets, among others, for NY interests. With the assistance of the revolving door of jobs among Wall Street bankers and the federal government appointees, Charlotte has been strong-armed by the cronyism of the Wall Street gang. Charlotte, a home of consumer banks, was not part of the overall investment banks problems ---but it has become one of the nation’s biggest victims of unchecked Wall Street power. But make no mistake—Charlotte will survive this and prosper again, with the great work ethic, moral principles and talent of its people.
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