I had a very spirited debate about this case with my business partner yesterday morning.
My partner's opinion is that what is done, is done. Let's not waste time and money picking through the wreckage of a done deal that has, by the way, actually turned out profitably for BofA. Government if full of thugs who wield too much power, usually coercively, and this case won't change that.
In fact, he noted, even Ken Lewis doesn't want his day of reckoning in court.
I have a different perspective. I welcome the opportunity for a trial in which Lewis, probably John Thain, Ben Bernanke and Hank Paulson can all be made to tell the truth, under oath, about their actions in this mess.
The motives of everyone are quite transparent:
Andrew Cuomo- currently thuggish AG of NY, badly wanting to follow Eliot Spitzer to the governorship on the back of this sensational case.
Ken Lewis- hapless, gutless former CEO of BofA who folded like a house of cards under pressure from Bernanke and Paulson, probably violating a slew of SEC regulations involving his fiduciary duty to his shareholders.
Hank Paulson & Ben Bernanke- probably engaged in illegal, improper and coercive behavior to force Lewis, against his wishes, to complete the Merrill Lynch purchase and deceive his shareholders regarding the total cost of the deal and Merrill's losses.
John Thain- recently-hired CEO of failed CIT, wants desperately to publicly clear his name in the Merrill Lynch affair.
Ideally, this trial will illuminate just who did what. From the various media accounts, someone is lying.
Bernanke and Paulson deny strong-arming Lewis. Lewis claims he didn't want to consummate the deal, but was forced to do so by Bernanke and Paulson. Thain claims he told Lewis about the losses and bonuses at Merrill. They can't all be telling the truth.
Ironically, as today's lead Journal staff editorial notes, Cuomo is personally responsible for having touched off the financial meltdown by setting higher percentages of low-income mortgages to securitize at Fannie and Freddie, while lowering downpayments.
In the recent Journal editorial, however, they made a rare mistake, claiming that because Merrill made some money for BofA last year, the deal was thus a good one. Really?
Doesn't it matter what the final purchase price was, and how much money was made? It's not clear yet whether Lewis' final string of acquisitions, including Countrywide and Merrill, will actually prove to be accretive. Maybe, with the fungibility of federal loans, we'll never know.
What better day of reckoning for the lot of them than a public courtroom and sworn testimony?
If everything goes well, there should be some perjury charges coming against someone or ones.
As I said to my business partner, I believe it's important for the public to see, if true, how federal officials Paulson and Bernanke improperly used their positions to coerce private company executives. If they abused their power, it should be made public, and they should be charged and convicted of said offenses.
We'll never curb abuses of power by high-level federal officials without making examples of those who misbehave. No matter if the events are now in the past.
Were someone with omniscience to inform us all, here's what I believe we'd learn:
-Ken Lewis abdicated his fiduciary duties to his shareholders, in order to keep his job.
-Bernanke and Paulson illegally coerced Lewis to behave improperly, keeping his shareholders ignorant of important new risks in the Merrill Lynch transaction
-John Thain informed Lewis and his BofA team of the losses Merrill was incurring, and the bonuses planned to be paid to Merrill personnel.
I may be wrong. But those are my contentions.
If I'm right, Lewis, Bernanke, Paulson and maybe Lewis' CFO should all, ideally, be wearing orange suits and raking sand traps at Allenwood.
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