need help in Econ(Money & Banking) Discussion homework
rami0777
econ_assighnment.docxThese three articles are not that current but they outline crucial topics covered in your recent readings. The Goldman article raises question about what constitutes fair compensation for employees AND shareholders of financial institutions. The GMAC article is especially important since the main topic is focused on the banking business model. This article highlights regulatory efforts to reel in risky behavior on the part of GMAC/ALLY. The third article about Capital One's fees highlights issues involving changes in banking regulation to better protect consumers. The final article discusses wrongdoings on the part of Bank of America's senior management during the financial crisis as Bank of America was attempting to acquire Merrill Lynch. There are allegations that Bank of America was dishonest in it's dealings with the FED, it's regulators and it's own shareholders as it attempted to finalize the acquisition of Merrill Lynch. (Some additional browsing for information may be required). Choose a topic and do some digging before forming an opinion and posting your argument.
Dodd-Frank - Consumer protection Act
Goldman Goes Gangbusters on Profit, Pay
Earnings of $3.19 Billion Demonstrate Wall Street Firm's Strength, but Bonus Questions Abound
Roughly a year after accepting unprecedented financial aid to shore up its operations, Wall Street firm Goldman Sachs Group Inc. posted yet another impressive quarter that further distances itself from rivals, many of which are still struggling to overcome the credit crisis.
The strong results -- a profit of $3.19 billion, or $5.25 a share, for the three months ended Sept. 25, up from $845 million, or $1.81 a share, a year earlier -- were greeted with a barrage of questions about Goldman's decision to set aside compensation at a breathtaking pace; its 31,700 employees are on track to earn an average of about $700,000 apiece in 2009, a record for the 140-year-old firm.
News Hub: Earnings Show Street is Back
4:03
Positive profits from Citigroup and Goldman Sachs show signs of Wall Street's resurgence. It begs the question when will Main Street follow suit and rebound?
Bloomberg News
Goldman Sachs Chairman and CEO Lloyd Blankfein
· Goldman's Soft Sell: Its Warm, Fuzzy Side
· MarketBeat: Ratcheting Back a Bit on Risk
"We are very aware of what is going on in the world, but we have to trade that off with being fair to our people who, we believe, have performed admirably throughout the crisis," said Goldman's chief financial officer, David Viniar.
While Goldman's profits have come roaring back, the firm has faced a populist backlash over the size of its bonus pool. Goldman navigated the credit crisis better than many of its competitors, but it played a role in causing the meltdown and was forced to take government aid. Goldman also has benefited from the Federal Deposit Insurance Corp.'s debt-guarantee program, which means it and other banks can borrow money at cheaper rates than before. And since the collapse of Bear Stearns Cos., it has had the ability along with other financial institutions to borrow money from the Federal Reserve.
The firm has tried to soften the blow of its decision to set aside huge pools of money for compensation; Thursday it made a $200 million charitable contribution to The Goldman Sachs Foundation, which had an existing $283 million in it. Still, that did little to deflect attention from the $16.71 billion it has earmarked for bonuses, which will be paid out early in 2010.
Bloomberg News
STANDING TALL: At Goldman Sachs's New York headquarters, executives are defending the bonus pool as commensurate with the firm's profit.
"Yes, I do think it's too big a focus," Mr. Viniar said. "I would prefer people to be focused on the success of our business, how well we're doing and how well our people are performing."
Goldman had a return on equity of 21.4% in the latest quarter despite the fact it is sitting on record levels of capital, which serve to drag down return on equity. Its profit of $5.25 a share was generated on revenue of $12.37 billion and outpaced analyst expectations by about $1 a share.
The bank's financial performance was powered by strong results in its fixed-income, currency and commodities business, where revenue more than tripled to $5.99 billion. Revenue from principal investments, ones made with the firm's own capital, was $1.26 billion, compared with a year-earlier loss. The results included a gain of $344 million related to the firm's long-held investment in Industrial & Commercial Bank of China Ltd.
In this year's second quarter, Goldman posted a record profit of $3.44 billion, largely by snatching business away from weakened rivals and churning out huge trading gains by revving up risk taking. Its stock-trading desk continued to post impressive results in the third quarter, though they were down a bit from the record second quarter. In a nod to how impressive these results are, the firm was operating at less than half the leverage it was in 2007. Borrowed money can amplify profits in good times but may increase losses in bad times.
It wasn't all good news for Goldman. Investment-banking revenue fell 31% to $899 million. Goldman attributed the drop to a decline in debt underwriting due to a decline in revenue from leveraged loans.
U.S. Turns Screws on Bailed-Out GMAC
By DAN FITZPATRICK and DAMIAN PALETTA
Thanks to a series of cheeky television ads that mocked its rivals -- and some of the highest interest rates on deposits in the nation -- Ally Bank was swimming in new money this spring.
The upsurge couldn't have come at a better time for its ailing parent company, GMAC Financial Services, which had just been bailed out by the federal government.
Bloomberg News
Al de Molina, CEO of GMAC, is talking to regulators about more U.S. aid.
But federal bank regulators put an end to the comeback party. Viewing the high-rate strategy as a perilous one, the Federal Deposit Insurance Corp. tightened its leash. It ordered Ally to lower its bank-deposit rates and to restrict its lending to low-end car buyers.
For GMAC, getting rescued by the federal government has been no picnic. In the 10 months since the consumer-finance company received its first dose of rescue financing, it has wrangled repeatedly with the FDIC over its turnaround plans. Currently the company is locked in debate with the Federal Reserve about the adequacy of its capital levels, with the Fed pushing GMAC to take billions more in federal aid from the Treasury Department.
Inside GMAC, executives have expressed frustration that hard-nosed regulators are hindering its plans for digging itself out of its mess, according to people familiar with the situation. At one point, GMAC executives even applied to switch Ally Bank's charter so it would be overseen mainly by the Federal Reserve rather than the FDIC -- an effort it abandoned on Tuesday.
GMAC's complicated relationship with the federal government stems from the government's conflicting priorities as it attempts to get the economy back on track.
On the one hand, it needs the private sector to provide consumers with abundant credit. But it can ill afford to have financial firms engage in the kind of risky lending that precipitated the crisis.
GMAC CEO Al de Molina said his brand of auto lending "does not represent undue risk" and "in no way led to the credit crisis." He added, "All we are trying to do is to make loans to small businesses and consumers in support of the auto industry."
For years, GMAC was owned by General Motors Corp., and its mission was to provide financing to car dealers and buyers. Eighty percent of GM dealers came to rely on GMAC to get cars onto their lots. In recent years, it expanded into other businesses, including real estate, commercial finance and auto insurance.
GM sold a majority stake to private-equity firm Cerberus Capital Management in 2006. The following year, Cerberus installed Mr. de Molina, a former chief financial officer of Bank of America Corp., as chief operating officer. He became chief executive officer in April 2008.
Last year's collapse of the U.S. housing and auto markets devastated almost every part of GMAC's business. When credit markets froze, the company had trouble funding its mortgage arm. The deteriorating condition of General Motors itself was another threat.
Mr. de Molina assembled a new management team and lined up $60 billion in additional credit. But by late last year, GMAC was close to failing, according to Washington officials familiar with the matter.
Mr. de Molina approached the government for help. Last Christmas Eve, in order to qualify for government money under the Troubled Asset Relief Program, GMAC converted to a bank-holding company. Days later, the government agreed to inject $5 billion in TARP funds and GMAC completed a debt-for-equity swap.
The arrangement left the Fed with regulatory authority over the parent company, while the FDIC retained primary oversight of GMAC's banking operations, subsequently named Ally Bank, which became a state-chartered commercial bank.
This spring, federal officials debated for weeks about how much additional assistance to offer the company. The Treasury wanted to provide a second dose of capital. But FDIC officials expressed reluctance to guarantee the company's debt under a separate government program, because of GMAC's shaky financial footing. GMAC officials felt the FDIC was stonewalling and could derail the entire package.
On May 7, the Fed announced that its "stress tests" showed that GMAC needed $11.5 billion in additional capital to absorb potential losses in the event that the economy worsened. It directed the company to raise the additional money.
Government Deal
On May 12, GMAC applied for its bank to be overseen by the Fed, which would have severely limited the FDIC's involvement in its daily operations. The following day, Treasury Secretary Timothy Geithner and FDIC Chairman Sheila Bair discussed GMAC's situation over the phone, Mr. Geithner's phone records indicate.
Ms. Bair eventually dropped her opposition to backing GMAC debt, and eight days after her phone conversation with Mr. Geithner, the government announced its broad aid package to the company.
The FDIC agreed to guarantee up to $7.4 billion of GMAC debt, and the Treasury committed to inject another $7.5 billion of capital. The government converted an earlier loan to General Motors into equity in GMAC, leaving it with a 35.4% stake in the company. The Fed waived a rule to allow GMAC's parent company to pass capital down to its banking unit.
The White House announced the new assistance on May 21. "This new arrangement with GMAC will help provide a reliable source of financing to both auto dealers and customers seeking to buy cars," said Mr. Geithner.
The arrangement left the FDIC potentially on the hook for billions of dollars under its guarantees on GMAC debt and on deposits at Ally Bank. The FDIC had serious concerns about two parts of the company's business strategy: its push to make more auto loans to borrowers with lower credit ratings, and its payment of hefty interest rates to attract online depositors to Ally Bank.
For GMAC, garnering new bank deposits was a cheaper way to raise capital than going to the bond market. So Ally Bank launched an entertaining national TV campaign that ridiculed its banking peers for having hidden charges and lots of fine print. One ad shows an adult handing a toy truck to a child, then snatching it back a few seconds later, saying it was a "limited time offer only." Ally promised "no sneaky bank disclaimers."
The ads, and the high interest rates, infuriated other banks, which complained to federal regulators that the company wouldn't even be operating were it not for the government's help.
In June, Sandra Thompson, the FDIC's head of bank supervision, wrote GMAC's Mr. de Molina. She reminded him that GMAC had agreed to ratchet down the rates the bank was promising to pay depositors, in an effort to reduce the bank's reliance on deposits as a source of capital. The message: GMAC's business practices were too risky.
FDIC officials get nervous when banks offer extremely high interest rates, particularly when it is done over the Internet, where customers don't have loyalty to any bank branch. The deposits are seen as "hot," or volatile. Depositors who flock to a bank for the rates might just as quickly desert it if a better deal appears elsewhere. That could lead to the equivalent of a cyber bank run. But Mr. de Molina said the bank's rates "allow us to make money and allow savers to get just a little bit more from their savings."
The FDIC asked GMAC officials to keep the rates on deposits low enough so the bank wasn't one of the nation's top five rate payers, as measured by Bankrate.com, an interest-rate information service, people familiar with the matter say.
In response to the pressure, GMAC lowered depositor rates a few hundredths of a percentage point at a time, hoping not to alarm customers. GMAC rates for a one-year certificate of deposit went from 2.8% -- the highest in the nation in late May -- to 2.3% in late June, and 2% in September. Nationally, the average rate on one-year CDs declined to 0.95% from 1.23% during that time, according to Bankrate.com.
The deposit-rate reductions pinched GMAC's money flows. New deposits to Ally Bank sank to between $200 million and $300 million per month in the third quarter, from more than $1 billion a month in the second-quarter, according to a person familiar with the situation.
The drop-off in deposits affected GMAC's auto-financing operations. The company has sought to do much of its auto lending through Ally Bank, where bank deposits provide a cheap source of funding for the loans. It has been prohibitively expensive for GMAC's low-rated parent company to raise additional money in the bond market.
The FDIC also was cool to GMAC's desire to expand its auto lending by reaching out to consumers with lower credit scores. GMAC executives argued to government officials that they needed to reach lower down the credit scale in order to boost business and provide credit to a broader swath of American consumers, according to people familiar with the matter. But the FDIC, concerned about protecting its rapidly depleting bank-insurance fund, imposed policies that made this more difficult.
The FDIC, for example, declined to relax a requirement that Ally Bank extend auto loans only to customers with credit scores above 660. The median score in the U.S. is currently above 700.
All this made it difficult for GMAC to stem declines in its auto-finance business. The average car loan made by GMAC's bank this year is to a customer with a credit score of more than 750, above the U.S. median. GMAC made $5.6 billion of new car loans in the second quarter, up from late last year but far below the $12.5 billion made in the year-earlier period.
GMAC has the option to lend to riskier borrowers through the parent company, which is regulated by the Fed. The Fed allows GMAC's financing arm to offer loans to consumers with credit scores as low as 621, and in some cases even lower. But raising money for such loans in the bond market is costlier than it is for Ally Bank to bring money in through bank deposits.
FDIC Resistance
The FDIC had guaranteed $4.5 billion of GMAC debt, but it was balking at guaranteeing more. GMAC executives were trying to persuade it to back another $2.9 billion. The FDIC's board had voted to wind down the debt-guarantee program by Oct. 31, except in cases of "clearly unforeseen and unexpected events," leaving GMAC executives little time to persuade the regulators to change their minds.
FDIC officials told GMAC executives they remained concerned about Ally Bank's high deposit rates. Again, the regulators insisted that the bank stay out of Bankrate.com's top five rate payers. The bank countered that that yardstick was not comprehensive enough, and proposed its own metric. The FDIC didn't go for it. With time running out, GMAC agreed to the condition.
GMAC's application to switch its banking charter to the Fed was another source of tension with regulators.
Such bids are controversial. White House officials and bank regulators have said repeatedly that companies should not be able to shop for more flexible supervision. The FDIC, in fact, had signaled to GMAC that it would not approve such a plan, as had the Fed.
Application Withdrawn
On Tuesday, GMAC withdrew its application to switch. In the afternoon of that same day, it got the additional FDIC debt-guarantee.
But questions about the company's capital levels remained unresolved. The results of last spring's stress test indicated that GMAC still needed another $5.6 billion to absorb potential losses if the economy were to worsen. GMAC had told regulators in August that it had sufficient capital already.
Mr. de Molina said the stress test "clearly showed" that GMAC's "asset quality profile was among the best of the banks reviewed."
The regulators weren't buying the argument. Talks turned to how much more the government would inject. GMAC proposed that it take $2.8 billion, about half the amount suggested by the stress test. The two sides face a Nov. 9 deadline to agree on a figure.
Testifying on Thursday before the House Financial Services Committee, Treasury Secretary Geithner said that after the government ordered GMAC to raise more capital in May, "there was no prospect, frankly, they were going to be able to raise that capital from the market." He said the government would "likely to have to put in less capital than we expected," but said policy makers needed to prevent such government assistance in the future.
"No government should be in the position of having to do this kind of thing again," Mr. Geithner said.
Analysts Fear Late-Fee Crunch for Capital One
By APARAJITA SAHA-BUBNA And BRENDAN CONWAY
Capital One Financial Corp. faced a pair of downgrades from stock analysts this week amid mounting concerns that tougher restrictions on late fees could crimp the company's earnings.
The lender reaps more income from late fees than top competitors, as its relatively large customer base of less-creditworthy borrowers tend to fall behind on payments. Analysts are concerned that a proposal from the Federal Reserve aimed at keeping late fees from exceeding a customer's minimum payment could dent this income stream.
Goldman Sachs downgraded its Capital One investment rating to "neutral" from "buy" one day after SunTrust Robinson Humphrey did the same, with both firms mentioning possible restrictions on late fees.
A Capital One spokeswoman declined to comment on the downgrades, citing the company's practice of not commenting on analyst reports.
Less creditworthy borrowers make up over 30% of Capital One's cardholders, according to Goldman Sachs, compared to the more typical 20% to 25% for its competitors.
In fact, the company's income from late fees may be as much as double that of its top competitors, according to some estimates. This week, Barclays Capital pegged Capital One's late- fee income last year as somewhere between $600 million and $1.2 billion, compared to $150 million to $300 million for Discover Financial Services and $526 million for American Express Co.
The Fed's proposal appeared to surprise some analysts. "While we knew that late fees were a topic of interest at the Fed given the mandate of the Credit Card Act, we previously took a more optimistic outlook than we believe is reflective in the Fed's proposed amendment" to laws governing the sector, SunTrust analyst John W. Stilmar wrote clients Thursday.
The late fee clampdown, assuming it becomes law, would likely hit Capital One harder than others. SunTrust analysts estimate the company's annualized earnings per share could drop by 30 to 60 cents assuming the tougher rules become law. The impact on Discover was viewed as being smaller, at around 6 to 10 cents per share, while the effect on AmEx was judged to be minimal.
Investors have also been concerned about Capital One's shrinking book of credit-card loans. Capital One shares fell after the company reported fourth-quarter results in January, even as Capital One reported a better than expected profit of $375.6 million. The sell-off stemmed from concerns that its credit-card profit of $509.9 million came from squirreling away less for potential losses in its credit-card portfolio rather than a fundamental improvement in its businesses. Delinquencies and loan defaults, for instance, remained high in its main operations.
The quality of Capital One's loan book, which is core to its lending business, hasn't significantly improved yet. In January, the company wrote off 10.41% of its U.S. credit-card loans, up from 10.14% in December. The write-off rate is annualized. Borrowers at least a month behind on their credit-card payments rose to 5.80% in January from 5.78% in December.
In contrast, American Express, which caters to more affluent borrowers, is exhibiting relatively healthier credit trends. AmEx's U.S. borrowers at least a month behind their card payments declined modestly, to 3.6% in January from 3.7% in December. In addition, AmEx wrote off 7% of its card loans in January, compared to 7.1% in December.
Bank of America Loses Civil Fraud Suit
NEW YORK -- Bank of America has lost a major civil fraud case brought by the Justice Department , a major victory for the federal government as it continues to pursue cases stemming from the financial crisis.
A federal jury in Manhattan found BofA liable for faulty loans its unit Countrywide Financial Corp. sold to mortgage finance giants Fannie Mae and Freddie Mac .
The jury also found former Countrywide executive Rebecca Mairone liable, a spokeswoman for U.S. Atty. Preet Bharara said.
Countrywide, a mortgage lending powerhouse based in Calabasas, was acquired by BofA during the height of the housing crisis in 2008.
In a statement, Bharara said: “In a rush to feed at the trough of easy mortgage money on the eve of the financial crisis, Bank of America purchased Countrywide, thinking it had gobbled up a cash cow. That profit, however, was built on fraud, as the jury unanimously found.”
The courtroom victory could strengthen the federal government's hand as it confronts other major Wall Street banks for conduct that contributed to the financial crisis.
The Justice Department and JPMorgan Chase & Co. have been hammering out a $13-billion settlement that would resolve a raft of federal and state probes stemming from faulty mortgage investments that fueled the financial crisis.
“That’s a very significant win for the government," said Thomas Gorman, a partner at the law firm Dorsey Whitney in Washington. “This kind of verdict will only strengthen government's negotiating position and probably make other major banks reevaluate what their position is."
Bharara's office filed the suit against BofA a year ago this week. The suit seeks $1 billion and accused Countrywide of saddling the U.S. government with faulty loans. The suit highlighted a program called "The Hustle" aimed at getting employees to churn out mortgages as fast as possible just as the housing market was failing.
"The fraudulent conduct alleged in today's complaint was spectacularly brazen," Bharara said at the time. "Countrywide and Bank of America made disastrously bad loans and stuck taxpayers with the bill." Government mortgage fraud lawsuit against BofA headed to trial
“The Wall Street reform bill will – for the first time – bring comprehensive regulation to the swaps marketplace. Swap dealers will be subject to robust oversight. Standardized derivatives will be required to trade on open platforms and be submitted for clearing to central counterparties. The Commission looks forward to implementing the Dodd-Frank bill to lower risk, promote transparency and protect the American public.” - CFTC Chairman Gary Gensler
Rule-writing process
As a result of the Dodd-Frank Wall Street Reform and Consumer Protection Act , the CFTC will write rules to regulate the swaps marketplace.
The CFTC has identified 38 areas where rules will be necessary. The public is encouraged to provide input on the rule-writing process. Information regarding each rule-writing area will be published as it becomes available.
The links below provide information on the 38 areas that the CFTC must address in its rule-writing, and also list the proposed rules and final rules issued by the Commission thus far.
View all Dodd-Frank Final Rules and Orders
View all Dodd-Frank Guidance, Questions and Answers, and Staff Letters
View all Dodd-Frank Open Meetings and Public Roundtables
View all Proposed Rules, Orders and Advance Notices of Proposed Rules
External Meetings
The CFTC is committed to transparency in the rulemaking process. Information on all meetings that Chairman Gensler and Commission staff have with outside organizations regarding the implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act will be made public. The topics of the meetings, attendees, summaries of the meetings and any materials presented to the CFTC are posted here.
Reports and Studies
The Dodd-Frank Wall Street Reform and Consumer Protection Act requires the CFTC to conduct a number of studies and reports on a wide variety of issues that affect the derivatives market. Information regarding these reports and studies will be published as it becomes available.
See List of Reports and Studies
Text of H.R. 4173: Dodd-Frank Wall Street Reform and Consumer Protection Act
Download the PDF of the bill, or
Read the text on THOMAS
Swaps regulation
The Dodd-Frank Wall Street Reform and Consumer Protection Act brings comprehensive reform to the regulation of swaps. These products, which have not previously been regulated in the United States, were at the center of the 2008 financial crisis. The historic Dodd-Frank bill authorizes the CFTC to:
Regulate Swap Dealers
· List of Provisionally Registered Swap Dealers
· List of Provisionally Registered Major Swap Participants
· Swap dealers will be subject to capital and margin requirements to lower risk in the system.
· Dealers will be required to meet robust business conduct standards to lower risk and promote market integrity.
· Dealers will be required to meet recordkeeping and reporting requirements so that regulators can police the markets.
Increase Transparency and Improve Pricing in The Derivatives Marketplace
· Instead of trading out of sight of the public, standardized derivatives will be required to be traded on regulated exchanges or swap execution facilities.
· Transparent trading of swaps will increase competition and bring better pricing to the marketplace. This will lower costs for businesses and consumers.
Lower Risk to the American Public
· Standardized derivatives will be moved into central clearinghouses to lower risk in the financial system.
· Clearinghouses act as middlemen between two parties to a transaction and take on the risk that one counterparty may default on its obligations.
· Clearinghouses have lowered risk in the futures marketplace since the 1890s. The Dodd-Frank bill brings this crucial market innovation to the swaps marketplace.
The country’s top cop for the massive global derivatives market is asserting that his agency has mostly fulfilled the requirements of the Dodd-Frank financial reform law.
“We were tasked by Congress to do something quite unusual in government,” Commodity Futures Trading Commission (CFTC) Chairman Gary Gensler said in an interview with The Washington Post published on Saturday. “And that is to bring a whole regime to what is now known to be a $400 trillion market where there was no oversight prior to that.”
He added that, while all the agency’s work is not done, “we have largely completed what Congress set out for us to do.”
The 2010 Dodd-Frank Act gave broad new authority to the CFTC to oversee the derivatives market, which was previously largely unregulated and played a significant role in the 2008 financial crisis.
Major new rules went into place earlier this month that Gensler said should decrease the risks the swaps market can have for the economy.
On Oct. 2, the CFTC launched new government-backed electronic platforms for derivatives traders. Early next year, the agency will require that traders switch to those “swap execution facilities” to new to increase transparency and allow regulators to get a better look into the trading system.
In the interview, Gensler said that he was “pleased” with the launch of the platforms, which he called a “paradigm shift.”
“Though the CFTC was in darkness due to the shutdown, we actually were able to bring some light to the swaps markets,” he said about the launch.
New regulations for international derivatives trading also went into effect, setting rules of the road for deals between firms and offices in different countries.
One lesson from the 2008 crisis, he said, was that “the far-flung operations of U.S. financial institutions can bring risks crashing back to here to our shores.”
New rules, he said, will ensure that overseas branches and institutions technically based out of a post office box in the Cayman Islands are covered by financial reform.
“Congress didn’t want us to forget those lessons,” he told The Post.
New York Attorney General Andrew Cuomo filed a lawsuit accusing former Bank of America ( BAC ) CEO Kenneth Lewis of misleading investors about Merrill Lynch's mounting losses before Bank of America acquired the firm in late 2008. The bank and its former chief financial officer, Joseph L. Price, were also charged.Cuomo and Special Inspector General for the Troubled Asset Relief Program Neil Barofsky filed the suit against Bank of America, Lewis and Price, alleging that they had duped shareholders into approving the Merrill Lynch merger and manipulated the federal government in order to receive massive taxpayer bailouts. "Bank of America, through its top management, engaged in a concerted effort to deceive shareholders and American taxpayers at large," Cuomo says in a press release . "This was an arrogant scheme hatched by the bank's top executives who believed they could play by their own set of rules. In the end, they committed an enormous fraud and American taxpayers ended up paying billions for Bank of America's misdeeds." Lewis has claimed that the then-Treasury Secretary Hank Paulson and Federal Reserve Chairman Ben Bernanke pressured him into completing the Merrill deal. Both men have denied coercing Lewis. In April, The Wall Street Journal reviewed a transcript of testimony he gave Cuomo's staff and found: "Mr. Lewis didn't say he was explicitly instructed to keep silent about the losses piling up at Merrill. But his testimony indicates that he believed the government wanted him to remain silent." Bank of America spokesman Robert Stickler told the Associated Press that the charges were totally without merit. He said the Securities and Exchange Commission saw the same evidence and did not find the bank or any individuals guilty of fraud. In fact, earlier today Bank of America agreed to pay $150 million in order to settle the SEC's charges that the firm failed to properly disclose Merrill's financial losses and employee bonuses. The payout is contingent upon court approval. Calls to Bank of America seeking comment were not returned by press time. Clearly, Cuomo, who is rumored to be interested in running for governor of New York, believes that Bank of America's actions deserve additional scrutiny, especially considering the $45 billion dollars the company received in assistance from the federal government. That money was repaid in December .
Over the course of his 40-year career at Bank of America, Lewis was lauded by former Chairman Walter E. Massey for being "a key architect in building a truly global financial franchise." Yet, in his final years, there was also enormous pressure for the bank to oust him. Before he announced his retirement last fall, Lewis had already been stripped of his chairman's job amid shareholder outrage over the Merrill acquisition. Since retiring, Lewis has probably been busy counting the $125 million he received in severance , writing a self-justifying memoir and doing the other things that very rich guys love to do. Now, he is going to need to add hiring a legal defense team to his to-do list, if he has not done so already.
