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Paulson and Bernanke: Indictment Time?
http://market-ticker.org/archives/982-Paulson-and-Bernanke-Indictment-Time.html

Hoh hoh hoh - Christmas in April?

Federal Reserve Chairman Ben Bernanke and then-Treasury Department chief Henry Paulson pressured Bank of America Corp. to not discuss its increasingly troubled plan to buy Merrill Lynch & Co. — a deal that later triggered a government bailout of BofA — according to testimony by Kenneth Lewis, the bank’s chief executive.

Ah, but here’s the rub:

Under normal circumstances, banks must alert their shareholders of any materially significant financial hits. But these weren’t normal times: Late last year, Wall Street was crumbling and BofA faced intense government pressure to buy Merrill to keep the crisis from spreading. Disclosing losses at Merrill — which eventually totaled $15.84 billion for the fourth quarter — could have given BofA’s shareholders an opportunity to stop the deal and let Merrill collapse instead.

“Isn’t that something that any shareholder at Bank of America...would want to know?” Mr. Lewis was asked by a representative of New York’s attorney general, Andrew Cuomo, according to the transcript.

“It wasn’t up to me,” Mr. Lewis said. The BofA chief said he was told by Messrs. Bernanke and Paulson that the deal needed to be completed, otherwise it would “impose a big risk to the financial system” of the U.S. as a whole.

Uh, its not under “normal circumstances”, it is under all circumstances.

Your first obligation isn’t to your regulator, it is your fiduciary responsibility to your share and bondholders.

If your regulator decides to remove you from office as a consequence, they do. That doesn’t change a thing; your personal interests cannot override your responsibilities.

As the CEO of a public firm you don’t work for the govermment, whether you think you’re some “left arm adjunct” or not. You work for the holders of your stock and debt - period. On this matter the law is clear, and the government, even post-TARP, had a minority stake.

As such they lack standing to tell you to shut up when your obligation to disclose is a matter of black-letter law.

We are a nation of laws, not of men. Paulson never left Goldman Sachs in his view of what his position at Treasury entailed - as CEO of a firm you can push people around under you, if you want, and you live or die by whether your decisions prove correct in the fullness of time. As a former CEO I know how this works - I made some very unpopular decisions from time to time, but those decisions were made in the best interest of all the shareholders (of which I was the largest one) - because they own the company and my job is to manage it in their interest.

While running to The Press (or simply blasting Paulson publicly when he attempted to pull this) would have inevitably led to an interesting set of confrontations, the fact remains that Mr. Lewis is not beholden to the government - he is beholden to shareholder and bondholder interests as a matter of law and the law on disclosure duties is a black-letter thing.

Here’s hoping Cuomo doesn’t table this issue but rather sees it through to its logical conclusion.

Conspiring to do an unlawful thing is frequently unlawful in and of itself.