Saturday, February 20, 2010
"The bank bailouts of the last two years have been 'about as popular as a root canal,' as President Obama noted in his State of the Union address. ... So it was probably inevitable that New York Attorney General Andrew Cuomo would file civil fraud charges against Bank of America, its former CEO Ken Lewis, and its former CFO Joe Price, as he did this week. Everyone assumes Mr. Cuomo is running for governor this year, and BofA is conveniently based in Charlotte, not Wall Street. .... The Martin Act is a prosecutorial bludgeon that forces most defendants to settle out of court rather than risk being convicted merely for having been wrong on some facts. ... When Mr. Lewis told Treasury Secretary Hank Paulson and [Fed] Chairman Ben Bernanke that he was considering invoking this clause and scotching the deal, they insisted he buy the faltering trading house and later announced an additional taxpayer investment in BofA to allow the bank to digest Merrill. Mr. Lewis swallowed hard and went ahead with the merger. Mr. Cuomo says this was all a bluff by Mr. Lewis in order to trick the regulators into providing more TARP money. Never mind that Mr. Lewis had a contractual right to pull out of the deal if he felt material facts had changed. ... Mr. Cuomo's logic boils down to this: Mr. Lewis is guilty for not telling his shareholders about rising losses at Merrill, but he's also guilty for trying to protect his shareholders from the rising losses at Merrill. ... On the public evidence so far, Mr. Cuomo should be thanking Mr. Lewis, not suing him", my emphasis, WSJ Editorial, 6 February 2010, link:
I'm with the WSJ. Cuomo's case against the BofA and Lewis was announced the same day as the SEC's new BofA settlement. Are Cuomo and the SEC engaging Lewis in a tag-team wrestling match? Cuomo apparently wants to run for NY Governor over Lewis corpse. I hope Lewis and the BofA take this one to the mat. That BofA is not headquartered in NY may be the reason Cuomo is pursuing this case to the Vampire Squid's applause.