Best of the Week
Most Popular
1.BrExit House Prices Crash, Flat or Rally? UK Housing Market Affordability Crisis - Nadeem_Walayat
2.Stocks Bull Market Climbs Wall of Worry, Bubble? When Will it End? - Nadeem_Walayat
3.Gold Price Is Now On Its Way To All-Time Highs - Hubert_Moolman
4.Deutche Bank Stock Price Crash - The EU Has Problems Far Beyond the Brexit - Harry_Dent
5.UK interest Rate PANIC CUT! As Banks Prepare to Steal Customer Deposits - Nadeem_Walayat
6.Gold and Silver Bull Phase 1 : Final Impulse Dead Ahead - Plunger
7.Central Bankers Fighting An Unprecedented Global Economic Slowdown - Gordon_T_Long
8.Putin Hacking Hillary for Trump, Russia's Manchurian Candidate? - Nadeem_Walayat
9.Stock Market Insiders Are Secretly Selling, Cycle Top Next Month - Chris_Vermeulen
10.Gold Sector - Is it time to Back up the Truck? – Mortgage the Farm? - Peter_Degraaf
Free Silver
Last 7 days
Merkel Prepares For a Deliberate Crisis While White House Plans For a Disastrous Succession - 24th Aug 16
Suspicious Reversal in Gold Price - 23rd Aug 16
If Trump Can’t Pull Off a Victory, Expect a Civil War - 23rd Aug 16
Ceding ICANN and Internet Control to Globalists - 23rd Aug 16
How to Spot an Oversold Stock Market - 23rd Aug 16
Gerald Celente Sees Worst Market Crash, New Military Conflict, Gold Spike to $2,000/oz - 23rd Aug 16
EU Olympics Medals Table Propaganda Includes BrExit Britain - 22nd Aug 16
BrExit Win's Britain Olympics Success Freedom Dividend, Economy Next - 22nd Aug 16
Stock Market Top Forming, but Slowly - 22nd Aug 16
(Really) Alternative Banking Systems - 22nd Aug 16
Vauxhall Zafira Fires - Second Recall Issued - Inspection Before Bursting into Flames? - 21st Aug 16
Will the Stock Market Bubble Pop Regardless if the FED Never Raises Rates? - 21st Aug 16
US Government Spending - 3 Big Stories Not Being Covered – Part III - 21st Aug 16
Silver Analysis - 20th Aug 16
SPX New Highs, Correction Next? - 20th Aug 16
Housing Bubble - The Marginal Buyer Holds The Pin That Pops Every Asset Bubble - 20th Aug 16
Gold Miners Q2 2016 Fundamentals - 19th Aug 16
Which Price Ratio Matters Most in a Fiat Ponzi? - 19th Aug 16
Big Policies, Bigger Failures - 19th Aug 16
Higher Crude Oil’s Prices and USD/CAD - 19th Aug 16
Here’s Why You Should Look for Dividend Stocks and How - 19th Aug 16
Deglobalization Already Underway — 4 Technologies That Will Speed It Up - 19th Aug 16
These 6 Charts Show Why the Average American Is Fed Up - 18th Aug 16
SPX Easing Lower - 18th Aug 16
Low / Negative Interst Rate’s Legacy - 18th Aug 16
The 45th Anniversary of The Most Destructive Event In Modern Monetary History - 18th Aug 16
USDU - An Important Perspective on the US Dollar - 17th Aug 16
SPX Completes Wave 1 Decline - 17th Aug 16
How to Quickly Spot Common Fibonacci Ratios on a Chart - 17th Aug 16
When Does a Forecast Become a Trade? - 17th Aug 16
Kondratiev Wave - The Financial Winter Is Nearing! - 17th Aug 16
Learn "The 4 Best Elliott Waves to Trade -- and How to Trade Them" - 16th Aug 16
Stock Market Bears Turning Bullish At New All Time Highs - Time to Get Worried? - 15th Aug 16
Job Seekers Sacrificed to the Inflation Gods - 15th Aug 16
A Look At Commodities and Financial Markets Trading Week Ahead - 15th Aug 16
Stock Market New Top Forming? - 15th Aug 16

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

How to Trade Elliott Waves

Did Bernanke and Paulson Commit Bank Fraud?

Politics / Credit Crisis Bailouts May 31, 2009 - 09:25 AM GMT

By: Global_Research

Politics

Best Financial Markets Analysis ArticleThomas 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.
thenewamerican.com

 Global Research Articles by Thomas R. Eddlem

© 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.


© 2005-2016 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

JD
02 Jun 09, 18:51
Paulson

When Paulson took on the position to head up the Treasury of the U.S., he took advantage of a benefit given to executives who "choose to serve their country" - a one time tax free sale of all his Goldman Sachs stock. To the tune of over $500,000,000! TAX FREE!

Theses are strange times we live in, indead!


Vee
09 Jun 09, 00:06
Paulson & Bernanke

Comment by Vee

June 8, 2009

11:56 PM

We knew that paulson and Bernanke were corrupted by the way they kept lowering the interest rates.

And paulson flew to china to make sure their money was safe when their stocks bottom out.

Bush and Those two were always in close contact, scheming their ways of corruption.

And they've made heavy sums from all the crap they've deal with in with all these banks going broke.

Obama is following in Bushes foot steps.

Even our own senators voted for the banks instead of helping people with their fore closers on their homes.

Vote the Bastards out of office.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife