Suing The Fraudsters

In General Interest by Jonathan Tasini0 Comments

   This got lost in the shuffle last week but is worth highlighting:

The legal drama surrounding the controversial takeover of Merrill Lynch by Bank of America, one of the pivotal moments of the financial crisis, took a fresh turn on Thursday as the attorney general of New York leveled civil fraud charges against Kenneth D. Lewis, the former Bank of America chief who masterminded the deal.

But no sooner did that news break than the Securities and Exchange Commission announced that it had struck a new, $150 million deal with Bank of America to settle its own cases involving the merger. Moments later, North Carolina’s attorney general announced that his office also had reached a settlement.

The developments open several new fronts in one of the most closely watched legal battles in American finance — one that now pits Wall Street enforcers against each other.

Andrew M. Cuomo, New York’s attorney general, is upping the ante in a match against Mr. Lewis and Bank of America. The S.E.C., however, is eager to put the matter to rest after suffering embarrassing setbacks in its case. Bank of America insists its executives did no wrong, although it, too, wants to put the case behind it.

Mr. Cuomo, who is expected to run for governor of New York and has been investigating the case for a year, is riding the wave of popular anger directed at big banks, which have stunned many Americans with their quick recovery from the financial collapse. Much like the S.E.C., his office claims that Bank of America essentially hid from its shareholders billions of dollars in losses at Merrill, which later forced Bank of America to seek a second bailout from Washington.

   This dovetails with another possible financial mugging:

Behind-the-scenes disputes over huge sums are common in banking, but the standoff between A.I.G. and Goldman would become one of the most momentous in Wall Street history. Well before the federal government bailed out A.I.G. in September 2008, Goldman’s demands for billions of dollars from the insurer helped put it in a precarious financial position by bleeding much-needed cash. That ultimately provoked the government to step in.

With taxpayer assistance to A.I.G. currently totaling $180 billion, regulatory and Congressional scrutiny of Goldman’s role in the insurer’s downfall is increasing. The Securities and Exchange Commission is examining the payment demands that a number of firms — most prominently Goldman — made during 2007 and 2008 as the mortgage market imploded.

The S.E.C. wants to know whether any of the demands improperly distressed the mortgage market, according to people briefed on the matter who requested anonymity because the inquiry was intended to be confidential.

   It’s clear that people still need to be held to account for the financial crisis. Let’s see if that happens.

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