Tuesday, April 28, 2009

Indict, Prosecute, and Jail All Three

Well, 'three' is merely rhetorical. It might be 3,000 by the time it's over. But Lewis, Paulson, and Bernanke are a very good start.

Both Bernanke and Paulson in mid-December knew Bank of America was obliged by statute to publicly disclose the huge losses Merrill Lynch & Co. had racked up that month. You don’t get to be chairman of the Federal Reserve or, in Paulson’s case, secretary of the Treasury or head of Goldman Sachs Group Inc. without learning this basic tenet of U.S. securities laws. Instead of making sure the public was fully informed of the losses before Bank of America completed its purchase of Merrill on Jan. 1, they did all they could to keep the secret safe.

Neither Bernanke nor Paulson told the Securities and Exchange Commission, according to the letter Cuomo wrote to lawmakers and regulators. They didn’t tell Lewis or anyone else at Bank of America to do the right thing and obey the law. And while they promised Bank of America lots of money to keep it from calling off the deal, they were careful not to commit any of their agreements to writing for fear this would bind the government into disclosing them itself.

It didn’t matter that investors were buying and selling billions of the banks’ shares without a clue that Merrill had lost more than $12 billion during the fourth quarter. Bernanke and Paulson had a singular objective -- to get the Merrill deal done, on time -- even if that meant duping the stock market and threatening to fire Lewis as chief executive officer, along with the company’s board.

--Quoted in Market Ticker

Lewis, of course, complied with the "requests," which makes him a co-conspirator and also guilty of fraud.

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