Corrupt bankers and corrupt government regulators

August 12, 2009 | By | 3 Replies More

Robert Scheer sums up the cozy relationship between the U.S. government and the financial sector and it’s ugly. One federal judge has the guts to tell it straight, but where is the SEC and where is the Obama Administration? In the process of acquiring failed brokerage house Merrill Lynch, Bank of America sneaks more than $1 Million in bonuses each to 696 Merrill Lynch executives who ran the company into the ground (Merrill Lynch had lost $27 Billion).  These outrageous payments occurred while BofA was receiving $45 Billion in taxpayer money as part of the “bailout.”   On top of that, 39,000 additional Merrill Lynch employees were each paid an average of $91,000 in bonuses, an amount that the Bank of America attorney suggested wasn’t a significant amount.  New York federal Judge Jed S. Rakoff disagreed, saying:

“I’m glad you think that $91,000 is not a lot of money; I wish the average American was making $91,000.”

How corrupt is the government/banking relationship? The SEC did sue BofA of misleading it’s shareholders, but this sweetheart settlement stinks to high hell. Consider this quote from Scheer’s article:

The SEC complaint did accuse BofA of misleading its shareholders, but instead of digging deeply into how such decisions had been made and by whom, a deal was concocted in which BofA got off with a paltry $33 million fine. That is less than the bonus received by one of the Merrill execs. Yet the SEC deal would have closed the case on how that decision was made.

“You filed a rather uninformative, bare-bones complaint,” Judge Rakoff told SEC lawyer David Rosenfeld, who lamely defended the decision to avoid going after the bankers involved, and it is instructive of whose interest he was serving that “[t]he lawyer for Bank of America periodically whispered what appeared to be suggestions to Mr. Rosenfeld,” as a New York Times article put it. Whispering between government regulators and the Wall Street honchos ostensibly being regulated is what got us into this mess in the first place.

In the meantime, TARP watchdog Elizabeth Warren is repeatedly warning that the same toxic assets that triggered the meltdown are still on the banks’ books. She’s warning of the “looming commercial mortgage crisis.”


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Category: Corruption, Economy, Politics

About the Author ()

Erich Vieth is an attorney focusing on consumer law litigation and appellate practice. He is also a working musician and a writer, having founded Dangerous Intersection in 2006. Erich lives in the Shaw Neighborhood of St. Louis, Missouri, where he lives half-time with his two extraordinary daughters.

Comments (3)

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  1. Erich Vieth says:

    The WSJ reports that big banks have gotten bigger. This is insanity:

    When the credit crisis struck last year, federal regulators pumped tens of billions of dollars into the nation's leading financial institutions because the banks were so big that officials feared their failure would ruin the entire financial system.

    Today, the biggest of those banks are even bigger.

  2. Jay Fraz says:

    Too big to fail is too big to exist, period. It is time to reinstate the 'death penalty' for overgrown corporation that are killing, maiming and pillaging the value of our country. Destroy the monopolies! /rant

  3. Erich Vieth says:

    Kudos to Judge Jed S. Rakoff, who refused to approve

    a settlement between the Bank of America and the Securities and Exchange Commission over bonuses paid to Merrill Lynch executives just before the bank took over Merrill last year. The $33 million settlement “does not comport with the most elementary notions of justice and morality,” wrote Jed S. Rakoff, the judge assigned to the case in federal court in Lower Manhattan. . . .

    The judge refused approval because "the fine in the case would be paid by the bank’s shareholders, who were the ones that were supposed to have been injured by the lack of disclosure."

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