Bernanke says he didn’t bully BofA to buy Merrill
Bernanke said no member of the Fed ever urged Bank of America to keep quiet about Merrill Lynch’s financial problems. Not divulging that information would have violated Lewis’ fiduciary duty to the bank’s shareholders.
“Neither I nor any member of the Federal Reserve ever directed, instructed or advised Bank of America to withhold from public disclosure any information relating to Merrill Lynch, including its losses, compensation packages or bonuses or any other related matter,” the Fed chief said.
via Bernanke says he didn’t bully BofA to buy Merrill – Yahoo! News.
Maybe some other readers more up to date on the BOFA-Merrill deal can help me out here, but isn’t it immaterial whether or not Bernanke instructed BOFA to withhold info about the hole in Merrill’s balance sheet from shareholders? It’s bad enough that he, Bernanke, knew about it and didn’t say anything. I mean, don’t those two things amount to the same thing, ultimately? Merrill was hiding billions in losses, BOFA and the Fed knew about it, and shareholders didn’t find out until the deal was already done, so… seems to me Bernanke is culpable no matter how you slice it. Unless I’m missing something.
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“seems to me Bernanke is culpable no matter how you slice it. Unless I’m missing something.”
Call me cynical, but when you’re wealthy/in a position of power you can get away with more than the rest of us proles usually can. You say Bernanke is culpable all day, it just won’t matter.
It seems pretty clear it stuck it to Merrill shareholders who I believe saw their stock sold for two bucks. So why does Obama have this guy around? Is the fed some magical place like Hogwarts where only wizards can run. To me Wall Street is run like a casino and the fed chairman is the pit boss.
Merrill shareholders were toast because Merrill was bankrupt — the stock was worthless. Who may have gotten screwed were BofA stockholders by coming to Merrill’s rescue. Making a correct call on that may be impossible given all the Fed slush funds that were created for the benefit of the banksters.
Back in ‘83 BofA purchased another brokerage firm: Charles Schwab. Big payday for Schwab and his executives (I had a nice dinner with one) because they got $20 million for it. A few years later BofA dumped the money loser back on Schwab for $10 million. Too bad they didn’t learn their lesson.
In response to another comment. See in context »Bernanke’s job is to keep secrets about the US Bank. So, it’s material if he shoved Lewis up against the wall and ordered him to keep his trap shut. Of course Lewis was too dumb to smell a rat when Bernanke initially offered BoA the sweetheart deal of the year.
This stuff is so complicated. There are rules of disclosure, and implications, and *nudgenudgewinkwink*, and none of it is really “governed”. There are possible consequences, but those require intent, and it is just so hard to really bust these guys for anything.
I am not so sure it is difficult to nail these guys…they leave a good paper trail, there was once this guy in New York who made them squeal quite loudly. What is missing is the will to go after these rats.
In response to another comment. See in context »Makes sense to me that no one is ripping into him for the truly outlandish shit that’s gone down – they’re not trying to overturn the Fed, they’re just letting Bernanke know that he’s on his way out.
Here we come Chairman Geithner.
Hey Matt – sorry in advance if I sound like a dick, but I think you’re missing the legal consequences because you’re looking at it from Bernake’s perspective. His statements affect Lewis’ legal liability much more than Bernake’s.
Lewis, of course, has several fiduciary duties to the shareholders as Chairman. Bernake does not. The shareholders of BOA will file a derivative suit eventually. There are several claims they could assert where Lewis breached his duties to BOA. Lewis will have affirmative defenses that any Board member would have – business judgment rule, relied on reasonable advice of investigators, etc.
But he won’t have the legal cover provided by an admission from Bernake. If he received an order from Bernake, it would most likely be game, set, and match. However, without the cover of an order from the soverign, Lewis’ judgment will be more subject to scrutiny.
I haven’t filed a derivative suit in a year or two, so my skills are a bit rusty. But Lewis is much more exposed now. As a shareholder of BOA, that doesn’t bother me at all.
BTW – I have an old copy of Spanking the Donkey. How can I get it signed?
Dear Matt,
If one takes the events of the fall in total, and listens to Ken Lewis interviews on the subject from Sept on, you can CLEARLY see that he was being a gentleman about having been bullied into buying a company that he had no interest in buying.
The real key to the issue, if you ask me is, BAC did their own due diligence after accepting to do what they were told to do, and came up with a price of half of what was paid or less. Instead, a BANKRUPT COMPANY NAMED MERRILL LYNCH (MER) gets 0.80BAC share for each of their bankrupt MER shares…if this isn’t the biggest clue to scam i don’t know what is!!! Remember, BAC didn’t even want to go the the secret Sept. treasury TARP meeting–this is a cash cow of a company, that got their coffers robbed by blackmail to buy MER.
The Fed adn all their agents, (since they are big daddy to GS now you know where they learned)do the same thing that GS does, they say something and KNOW that they have all of our country believing in their magesty so, it is added to the long list of conventional wisdom that people accept when in fact it is one more lie in the long list of lies we are tethered to.
Matt,
I read the Print piece. That was THE best I’ve read from you. No equal.
I don’t get the impression that Goldman is a pioneer in the art of legal theft, I just think they let other companies who may or may not have stumbled onto soemthing that could be exploited show them the way, then they use every tool in their break-in kit to dominate that technique.
For example: I don’t think they brought Netscape public in 1995. That’s what really started the phenomena of IPO stocks going up hundreds of percent on opening day. Once they saw that , then they geared their operations for “Bullshit.com”. Netscape was a profitable company. The ones they brought out were slapped together websites or ventures that consumed so much money doing something so obvious that the IPO became a joke. It wasn’t a joke though to the millions who lost money as that bubble burst.
I read about laddering. It’s hard to see why no one went to jail for this. It was clear manipulation. Those tiny fines were a joke.
The cap for me was when you pointed out they paid somewhere in the neighborhood of 27 billion in bonuses and 14 million in income taxes. The other question that you raised for me is; how much money is sitting in tax free havens?. How many of those banks really did need TARP funds?
I’m betting Goldman is a leader there too
There were a number of things I wasn’t aware of though that may put them in pioneer status. The Cap and Trade bubble ( coming to a neighborhood near you) and the letter they got in 1991 from the govt stating there wasn’t any limit in commodity futures.
The rest of it is like a fine woven fabric of connecting all the dots showing your readers who these people are and how long they have been doing it. Well done.
Matt,
Love your work in general, but your question here is imprecise to the point of stupid. Bernanke may be “culpable,” in the sense that you can “blame” him. After all, he’s like the real estate agent that sold you “waterfront” property without disclosing that it’s on an active floodplain and therefore uninsurable. You can “blame” the agent verbally, but you can’t hold him “liable” legally. It was your job to get insurance before the close.
In this situation, Ken Lewis is the one who is legally liable. It was his fiduciary duty to know what he was buying for his company, and it was his fiduciary duty to stop the train if he felt it was a bad deal. They call it a “duty” because you have to do it even if it is hard, or even if it makes Ben Bernanke mad at you.
Actually, page 19 of the second PDF document is more directly relevant to the question at hand.
I see that T/S doesn’t like hyperlinks. I was trying to refer to this PDF document:
oversight.house.gov/documents/20090625160518.PDF