Friday, April 24, 2009

Cuomo to Jail Paulson? Good Idea!!

Little-noticed except in banker/politico circles, but very, very important. UPDATES BELOW!

According to the February 26th testimony of Bank of America CEO, Ken Lewis, before New York State Attorney General, Andrew Cuomo, Paulson strong-armed Lewis into completing the Merrill takeover, without disclosing to B of A shareholders that Merrill’s losses were much larger than publicly disclosed."

Lewis testified that he asked Federal Reserve Chairman Ben S. Bernanke to ‘put something in writing’ regarding the US government's plan to support pack of America's acquisition in view of Merrill's mounting losses," Bloomberg news reported yesterday. “After Bernanke said he would consider the idea, Paulson called Lewis and said, according to Lewis, ‘First, it would be so watered down, it wouldn't be as strong as what we were going to say to you verbally, and secondly, this would be a disclosable event and we do not want a disclosable event."

--Rude Awakening Newsletter 4/24/09, Bloomberg News (Similar story here.)

Which is to say that Henry Paulson, ex-Secretary of the Treasury of the US, is a co-conspirator to defraud the shareholders of Bank of America, AND the taxpayers who have coughed up money for the undisclosed "disclosable event." It is also possible that Lewis himself can be brought up on similar charges; as argued in the link above, Lewis' legal (and fiduciary) responsibilities are NOT to Paulson and Bernanke, but to the shareholders of BofA.

Let's hope that Mr. Cuomo pursues this line of investigation and issues indictments.

After all, Paulson has no "credibility" at this time, anyway.

Oh--one more thing: Thanks!! to GWBush.

UPDATE: Another Vote for Indictment by Vox

Even more on the topic from Ticker:

Let's outline the possibilities. There are only two:

1) Ken Lewis lied in his testimony. That is, he committed perjury and must be so charged. He also committed securities fraud, acting alone; the shareholders should sue him to Mars and the SEC should bring both civil and criminal felony complaints.

2) Ken Lewis told the truth. Ben Bernanke and Hank Paulson, both federal officials, grossly exceeded their authorities, possibly exposing them personally to liability, both civil and criminal. "Acting under color of authority of law" is an extremely serious matter and the predicate act may rise to extortion; since they acted in concert one must ask if racketeering may have taken place (in a legal context.) In addition Ken Lewis is an active participant as he cooperated with this unlawful act as demanded and he must also be charged.

Oh, so what?

Just as importantly we must have the truth for the integrity of our capital markets. That fluttering sound you hear is foreign capital departing, and if we are not careful since this extends to the highest level of our Treasury and Banking System (The Fed) the risk is very real that we will incite a run on Treasury Securities, which would lead to an immediate collapse of federal funding and the failure of our political and economic system

--THAT's what.


TerryN said...

Send him to Gitmo! And take Geithner with him.

J. Strupp said...

I'm with you Dad29. If Ken Lewis has a job by Monday morning I'd be shocked and disgusted with the current shareholders. The SEC should be all over this guy. This is the very definition of fraud.

It also a good example of why PPIP is doomed to fail. When you put a half dozen hedge fund managers, bank CEO's, and government officials together as a "partnership" for the good of the economy at large, you know darn well how that's gonna play out. Hedge fund gets rich, taxpayer gets screwed.

J. Strupp said...

My mistake, this might be a DOJ issue not SEC.

Or both I guess.