How Bank of America Execs Hid Losses—In Their Own Words

[marmar]

How Bank of America Execs Hid Losses—In Their Own Words

by Cora Currier
ProPublica, June 4, 2012, 4:50 p.m.


When Bank of America announced it was buying Merrill Lynch in September 2008, bank execs told their shareholders that the merger might hurt earnings a touch. It didn't turn out that way. Losses at Merrill piled up over the next two months, before the deal even closed. Yet the execs kept painting a prettier picture to shareholders — even though it turns out they knew better.

As the New York Times detailed this morning, a brief in a new lawsuit filed in federal court in Manhattan recounts sworn testimony and internal emails in which execs admitted to giving bad information to shareholders and that they had worried about the legal ramifications of doing so.

According to the filing, Bank of America's then-CEO Kenneth Lewis admitted in a deposition that what he told shareholders about the financials of the merger was "no longer accurate" on the day they approved it.

We've pulled out the most revealing parts of the suit, which tell the story of how the deal went down. .................(more)

The complete piece is at: http://www.propublica.org/article/how-bank-of-america-execs-hid-losses-in-their-own-words

[xchrom]

1. du rec. nt

[Scuba]

2. Yet Repukes think Skank of America is over-regulated.

[exboyfil]

3. Wasn't BoA and ML a shotgun wedding brought about

by federal appointees (Bernanke and Paulson?).

http://www.cbsnews.com/2100-501563_162-5080138.html
Newly uncovered e-mails from inside the Federal Reserve, released by these Republicans, show that Paulson, Bernanke and other government officials used a heavy hand to make sure Bank of America CEO Ken Lewis completed the already-announced acquisition.

At issue is whether or not the government put improper pressure on Lewis to move ahead with the proposed acquisition of Merrill Lynch, even though he had learned that Merrill's losses were far worse than he thought, and he worried that the purchase might imperil his own shareholders.

At one point, an official with the Richmond Federal Reserve suggested, in an e-mail, that the government would remove Lewis and other top company officials if they didn't complete the deal.

Bank of America's board documented the threat in the minutes from a December meeting.

"The Treasury and Fed stated strongly that were the corporation to invoke the material adverse 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," acccording to minutes released by the committee Wednesday evening.

***
In some ways parallel to the haircut that GM bondholders were forced to take in the restructuring over the what would have been typical in a standard bankruptcy.

In both cases investors got screwed by government intervention (not that I am defending BoA they got a bunch of other garbage they are responsible for).

[DCKit]

4. Not just that, the Bear Stearns (sp?) buyout was less than the value of the building.

I could have taken a mortgage out on that one - 20.5 million for a highrise on wall st.

[dixiegrrrrl]

5. This is exactly what Facebook IPO did.

Well, the IPO did 2 things:
covered up facts about losses of value
and
let a few insiders in on the secret so they could dump their stock before it fell too much.
I am happy to see the many lawsuits which promptly followed.