Did BofA and the government bamboozle us all?

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Sure looks that way.  Remember that ballyhoed agreement last January, in which the government pretty much took the risk out of BofA’s acquisition of Merrill Lynch by guaranteeing many of Merrill’s flailing assets? Well, apparently Ken Lewis, BofA’s chief, never signed the agreement.  That fact surfaced in May, five months later (amid much less hoopla than the original, I might add). And in the interim many investors, taking succor from the government guarantees, put money back into BofA and helped it get its footing.

BofA — surprise, surprise — says it owes the government nothing, since an unsigned deal never existed. The government says the public perception of a deal helped BofA immeasurably and thus Bof A should fork over some gratitude cash.

The breakingviews blog sides with the government, and  paints some interesting scenarios on how much BofA should pay (I smiled at one of them: a merger break-up fee).  But no one seems to be raising the following question:

Doesn’t the demise of that agreement constitute material information? Didn’t BofA have a fiduciary responsibility to tell shareholders that the deal hadn’t been signed?  And even if technically they didn’t, didn’t the government have a moral obligation to pressure the company into signing by publicizing the fact that it hadn’t?

Everyone says that a key part of reviving this ailing economy is by fixing the broken financial system, and restoring shareholders faith in surviving banks. This is NOT the way to do that!