"Bernanke warns that meddling with Fed's monetary policy cause harm economy
_________________
"Did Bernanke and Paulson Commit Bank Fraud?
May 31, 2009 - 09:25 AM
By: Global_Research
"Thomas R. Eddlem writes: New revelations from the New York State Attorney General’s office have all but proven that Federal Reserve Chairman Ben Bernanke and former Treasury Secretary Hank Paulson committed bank fraud crimes in the case of the Merrill Lynch/Bank of America merger that took place last year. New York State Attorney General Andrew M. Cuomo revealed that Paulson and Bernanke illegally suppressed adverse financial data on the merger and threatened to replace the Bank of America CEO and board of directors if the company backed out of the Merrill Lynch merger. “Secretary Paulson has informed us that he made the threat at the request of Chairman Bernanke,” Cuomo wrote in an April 23 letter to Congress.
The two companies signed a tentative merger agreement September 15, 2008, but the agreement included a “Material Adverse Change” (MAC) clause that would allow Bank of America (BofA) to escape the merger if BofA financial officers found undisclosed financial information that would hurt BofA while looking at Merrill Lynch’s books. Bank of America shareholders approved the agreement with the MAC clause December 5, 2008. The final merger was to take place January 1, 2009.
But on December 14, BofA financial officers informed CEO Kenneth Lewis that Merrill Lynch’s quarterly losses would be $3 billion more than expected (the $9 billion in expected losses ended up being a $15 billion loss — a $6 billion increase over what stockholders expected and approved). Three days later Lewis informed U.S. Treasury Secretary Hank Paulson by phone that Bank of America planned to exit the merger using the MAC clause. Paulson urged Lewis to get on an airplane and visit his office.
Lewis met with Paulson and Bernanke December 21, where Lewis was told he would be replaced if BofA exercised the MAC clause. “I can’t recall if he said ‘we would remove the board and management if you called it’ or if he said ‘we would do it if you intended to,’” Lewis told Cuomo. Then Bank of America Chief Executive Officer Kenneth Lewis tried to “deescalate” the conflict by saying he’d talk to his board. Lewis also testified he was instructed not to reveal the staggering Merrill Lynch losses to his stockholders: “I was instructed that ‘We do not want a public disclosure,’” Lewis told Cuomo’s office. Lewis took it as a demand to defraud his stockholders, a demand that he and his board of directors complied with.
The BofA board met the next day to discuss the disastrous merger, and the minutes revealed: “The Treasury and Fed state strongly that were the Corporation [Bank of America] to invoke the material adverse change (“MAC”) clause in the merger agreement with Merrill Lynch and fail to close the transaction, the Treasury and Fed would remove the Board and Management of the Corporation.”
That decision by Lewis and his board led Bloomberg.com financial columnist Jonathan Weil to comment in a particularly insightful column: “As for Lewis and the rest of Bank of America’s board, it’s a foregone conclusion that their word is now mud. The more honorable and legally appropriate path for them would have been to resign rather than participate in the cover-up.”
But more than just honor was violated. The law was violated as well. According to bank fraud laws, Paulson, Bernanke, Lewis, and his board of directors committed bank fraud against their stockholders. The Justice Department’s Criminal Reference Manual says of the bank fraud law: “The elements of the offense of making a false statement are: (1) making a false statement or willfully overvaluing property or security knowing the same to be false, (2) for the purpose of influencing in any way the action, (3) of the enumerated agencies and organizations.”
Bank fraud laws are so severe that an actual loss of stock value needn’t be actualized in order for criminal bank fraud to take place, according to the Justice Department Criminal Reference Manual. “The mere probability of loss to the bank is sufficient to establish intent to injure, and neither a possibility of future benefit to the bank nor restitution is a defense.” Of course, Bank of America did experience a serious financial injury. The stock price tanked from about $30 per share in September down to $5 per share in March, an 87 percent loss of value, and the otherwise financially secure Bank of America needed billions in federal bailout money just to survive.
Senator Chris Dodd told CNN that hearings on Cuomo's revelations may be warranted, though Weil noted, “Senate Banking Committee Chairman Christopher Dodd took V.I.P. loans from Countrywide Financial Corp., now a subsidiary of Bank of America.” So what are the chances that a serious investigation will take place?
Weil correctly points out: “Knowing what we know now, how could you ever trust anything Bernanke says again?” He also appropriately wonders openly whether current Treasury Secretary Timothy Geithner (then the New York Federal Reserve Bank chairman and number two man on the Fed’s Open Market Committee) was involved in the deal, or if he was somehow incompetently unaware of what was going on right under his nose. Either way, the government’s financial leadership in Washington right now is untrustworthy at best and felonious at worst.
In the mythology of the left, unregulated “free enterprise” as a financial system failed under the Bush administration. The Bank of America/Merrill Lynch fraud case authoritatively proves that mythology false. Laissez-faire free enterprise was pretty much the opposite of what happened on Wall Street during the financial boom and subsequent bust. The failure was caused by government, which in this case nearly bankrupted the largest bank in America when top government officials engaged in criminal fraud and leveled ugly political threats that — if they had been made by Mafia functionaries — would be prosecuted under racketeering laws."
© Copyright Thomas R. Eddlem, Global Research, 2009
Disclaimer: The views expressed in this article are the sole responsibility of the author and do not necessarily reflect those of the Centre for Research on Globalization. The contents of this article are of sole responsibility of the author(s). The Centre for Research on Globalization will not be responsible or liable for any inaccurate or incorrect statements contained in this article.
http://www.marketoracle.co.uk/Article10991.html
April 2024 March 2024 February 2024 January 2024 December 2023 November 2023 October 2023 September 2023 August 2023 July 2023 June 2023 May 2023 April 2023 March 2023 February 2023 January 2023 December 2022 November 2022 October 2022 September 2022 August 2022 July 2022 June 2022 May 2022 April 2022 March 2022 February 2022 January 2022 December 2021 November 2021 October 2021 September 2021 August 2021 July 2021 June 2021 May 2021 April 2021 March 2021 February 2021 January 2021 December 2020 November 2020 October 2020 September 2020 August 2020 July 2020 June 2020 May 2020 April 2020 March 2020 February 2020 January 2020 December 2019 November 2019 October 2019 September 2019 August 2019 July 2019 June 2019 May 2019 April 2019 March 2019 February 2019 January 2019 December 2018 November 2018 October 2018 September 2018 August 2018 July 2018 June 2018 May 2018 April 2018 March 2018 February 2018 January 2018 December 2017 November 2017 October 2017 September 2017 August 2017 July 2017 June 2017 May 2017 April 2017 March 2017 February 2017 January 2017 December 2016 November 2016 January 2013 October 2011 September 2011 August 2011 July 2011 June 2011 May 2011 March 2011 January 2011 December 2010 October 2010 September 2010 August 2010 July 2010 June 2010 May 2010 April 2010 March 2010 February 2010 January 2010 December 2009 November 2009 October 2009 September 2009 August 2009 July 2009 June 2009 May 2009 April 2009 March 2009 February 2009 January 2009 December 2008 November 2008 October 2008 September 2008 August 2008 July 2008 June 2008 May 2008 April 2008 March 2008 February 2008 January 2008 December 2007 November 2007 October 2007 April 2007 March 2007 February 2007 January 2007 December 2006 November 2006 October 2006 September 2006 August 2006 July 2006 June 2006 May 2006 April 2006 March 2006 February 2006 January 2006 December 2005 November 2005 October 2005 September 2005 August 2005 July 2005 June 2005 March 2005 November 2004 October 2004