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Judge Rakoff Refuses To Approve SEC's "Not Remotely Reasonable" Settlement With BofA
Looks like Mary Schapiro's attempt to curry favor with some disenfranchised people who still don't grasp the SEC for the conflicted "regulatory" mess it has become may end up being very short sighted. At today's hearing Judge Jed Rakoff, whom Zero Hedge wrote about previously, is in no rush to steamroll this particular "settlement" down the throats of investors. From Bloomberg:
The hearing, held in New York before U.S. District Judge
Jed Rakoff, ended with Rakoff saying he needs more information
on the Aug. 3 accord between the bank and the U.S. Securities
and Exchange Commission, which filed the suit. The settlement
won’t be final unless Rakoff approves it.
Rakoff said that if the SEC is right that Bank of America
lied about whether to pay the bonuses then the proposed
settlement is not “remotely reasonable.”
“Don’t I need to know what the truth is to make a
determination?” Rakoff asked. If Bank of America broke the law
by not disclosing the bonuses, “is there not something
strangely askew in a fine of $33 million” given the size of the
deal, Rakoff said.
If BAC is right and they didn’t hide the bonus information
then Rakoff said he could see how the settlement “might be
approvable” on the theory that they want to take $33 million, as
long as it’s nongovernment money, to get rid of the litigation.
“It seems to me that I need a lot more material from the
parties before I can assess whether this is a fair and
reasonable settlement,” Rakoff said. “There are important
legal issues that have been glanced at here but need to be
briefed.”
“I would be less than candid if I didn’t express my
continued misgivings about this settlement at this stage,”
Rakoff said. “When this settlement first came to me it seemed to
me to be lacking, for lack of a better word, in transparency. I
did not know much about the facts from the complaint. I did not
know much, or really anything, about the basis for the
settlement.”
But then again, from numerous prior congressional hearings in which Ken Lewis personally has testified and used the fancy word "commingled" repeatedly, there is no way to keep track of what money is the government's and what money is the bank's.
Rakoff demonstrated some apt cynicism with some earlier questioning, trying to determine who was responsible for the bonus payment:
“Was it some sort of ghost?” Rakoff asked today. “Who
were the people? Mr. Thain and Mr. Lewis would seem to be
responsible, yes?”
“If they would not have paid out $3.6 billion, they would
have had a loss of $3.6 billion less, no?” the judge said,
referring to Merrill.
and this
[BofA lawyer Lewis] Liman said of the total $3.6 billion in bonuses, Merrill
was contractually obligated to pay $850 million. The rest was
paid to 39,000 employees, for an average of $91,000, which was
“not a lot of money,” Liman said.
“I’m glad you think $91,000 is not a lot of money,”
Rakoff replied. “I wish the average American was making
anywhere near $91,000.”
Zero Hedge applauds (for the time being) this Judge's seemingly earnest desire to get transparency to the surface over Mary Schapiro's less than inspired attempt to shroud the whole matter with the pretense of settlement. The question again is at what point will the CEO of Bank Of America finally be shown the door? How many such comparable gross judgments of error (granted they were with other people's money) will Lewis have to perform before his board finally stop sucking at his proverbial teat. Maybe Rakoff should make finally make a Lewis ouster as the minimum condition for any settlement, even with an organization as ineffectual and as conflicted as the SEC.
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Thank you Judge Rakoff.
Seriously, thank you.
Judge Rakoff offers 'glimmers of hope'... so refreshing in this incestual oligarchy.
Take back the trillions of $$$ given to the banks, who just sit on it and make it totally ineffective then start government incentive to create realistic industries that give employment and generate real productive income, some of which would hopefully be from exports.my newest bookmarked finance website..http://www...
Sad we are all so surprised the system of Checks and Balances actually works... for the time being anwyay
But it only when the checks and balances involve judges! The other "checks and balances" are nothing more than checks made out by banksters to increase politicians' reelection fund balances.
too funny and unbelievable in the same time http://www.nytimes.com/2009/08/11/business/economy/11expats.html?_r=2&pagewanted=1&partner=rss&emc=rss
The "brain drain" used to head this way exclusively. Bye, bye empire Amerika.
D.O.D. there you go... your problem is solved... no more waiting for California to answer your calls concerning unemployment... get out while the getting is good. Leave a forwarding address so we can all visit.
I agree. I have a lot more confidence in the Judiciary than any other branch of Government.
Hmmmm. Someone please explain how a bigger fine is beneficial to shareholders? Whatever fine is decided it so far appears to be assessed on BAC itself, not on any individuals. Am I missing something?
This case will provide fodder for the class-action suits to follow. Deep-pocket class-action lawyers vs Bernanke, Paulson, Lewis, Shapiro.
POPCORN!
I'll start popping now... because that will be one luscious mess... can you even imagine the depositions and interrogatories that will flow from the civil litigation...
I think a lot of people should use that phrase '£91K not a lot of money' to any and every bank that seeks to foreclose, try to enforce late payment charges, severance pay, and anything else it could be applied to.
Agreed... LOL
Unfortunately, the trial lawyers that would preside over such dollar-slush-fest will require you fill out 30 pages of Class-Action paperwork for settlement of $1.25, less postage and handling of course. </sarc>
Class-action suits. Class-action-suits. Class-action suits.
Let the mofos bleed !
Jed Rakoff for Supreme Court!
...Throw somebody off if you have to!
Can they fine 500 million dollar to Bank of America? It is getting interesting..
You gotta change your username or speak better engrish. You made me laugh and you werent trying to. Looks like Im going to learn how to use this user track feature =)
Show some civility, please.
It was compared to what went through my mind.
Serious props to Judge Rakoff. I have a sense that he will not be bullied by the establishment; perhaps the relevance of those town-hall meetings are starting to sink in.
uh, lol
It never ceases to amaze me when Wall Streeters/ CEOs/ lawyers and the like insist that some amount is "not a lot of money" when it would take a two minute trip to the U.S. Census website to find out that the median family income in America is some fraction of the amount they're discussing.
The playing field is now so unlevel in this country that it's basically vertical.
Remember, $91,000 is not a lot of money to them. You'd think that would would be an argument for giving that "not a lot of money" back to the shareholders.
Tell that to the IRS..
$91K is about what Judge Rakoff is paid for seven months of sitting on the bench. The 2008 salary of a federal district judge was $169,300. http://www.uscourts.gov/salarychart.pdf
In other words, $91K IS "a lot of money" to a federal judge.
Altering behavior at captured regulatory agencies may just be a genuine green shoot.
Who does Mary call now?
..
Judge Rakoff, appreciate giving us little guys "some hope" and keeping fingers crossed you stick to your guns.
Judge Rakoff => Walter Sobchak
"Our basic freedoms." Am I wrong?
I love the phrase "Without admitting or denying guilt...".
Written by attorneys for attorneys.
This guy is just putting on a act in an effort to make you believe the system still possesses some semblance of sanity and justice.
It's the good cop - bad cop act between the Rakoff and Schapiro.
since most judges are bought and paid for whores of the oligarchy i would withhold irrational exuberance.....but if the fine becomes palpable, tangible, and material, then i would adorn the judge with glowing accolades....
more than likely he will fall victim of a plane, boating, or cooking accident....if dead men told tales, william colby could tell a good one.....
as a collossal piece of shit, ken lewis should either jump from the boa tower in raleigh or come to atlanta to drown in the city water works sludge plant off plant-atkinson....
maybe the same flight crew which arranged ron brown's air flight to serbia could also schedule lewis' flight to lala land...
This is going to sound unusual and is not a defense of bankers in general, but I just took a look at Ken's background and of all the bankers, relatively speaking, he actually seems like one of the least crooked.
*Lewis' salary has been a flat $1.5 million three years running, his $5.7 million bonus of 2005 falling to zero in 2006 and 2007.
*Banker of the year award in 2001 and 2008 (not sure what I think about that)
*Operates out of Charlotte, not New York (the cesspool close to Washington)
*The bonus payouts spoken about above were paid out by John Thain prior to the acquisition. Ken tried to back-pedal out of the acquisition but was THREATENED by Paulson and Bernanke that he and the board would be removed if he did not follow through. The bonus payout of at least $850m was already stipulated in the deal and the two most powerful bankers, Paulson & Bernanke already stated he could not back out.
*Ken was the only honest person speaking in front of Congress when he shared the secret that he was threatened with being ousted if he backed out of the Merrill deal.
If this judge wants to get at the heart of the matter, he will have to talk with Bernanke, Paulson, and Thain - Ken didn't want to acquire Merrill, much less pay out massive bonuses and take even bigger losses - HE WAS THREATENED TO DO IT.
For those that understand political subterfuge, the fix is in. I am wondering if this isn't an anti-non-semitic attack. Read that again, let it sink in, and ask yourself which banker is not like the others. I guess Lloyd and the rest were really upset that BOA would become the largest bank and that Ken would be named banker of the year when they skim so much more money than BOA.
I could care less about Ken Lewis or the rest of the bankers, I just wanted to put it in perspective for you so that you could see the big picture and mis-direction.
these points are valid and 1.5m as a ceo of boa
is absolutely nothing....it isn't even walking
around money.....
my only complaint against lewis is that he
did not have the intestinal fortitude to stand
up to the bullies....if indeed he objected
professionally to the merril deal, he, as the chief
leader, should have said no, or resigned.
Theoretically, you should be able to do more good from the inside than from the outside looking in. He would be replaced by a crook that can keep his mouth shut.
Watch "The International" movie, and then ask yourself what you would do. US Presidents have been taken out for opposing the cartel, printing US notes, etc.
Lewis also told Congress, "You don't mess with the Fed" - he was trying to tell us something.
The irony is that the guy who tried to stand up and share is being targeted because he spoke up, which is moronic and transparent except to the IQ deficient.
regardless of my deficient iq standing up
and sharing is not moronic and transparent
because it is only when the sun shines in the
big outdoor that darkness vanishes.....
inside machiavellian power plays will get only
so far because systemic evil will eventually
overwhelm that small light...unless the truth
is spoke large, it will not travel the distance
to unleash the powers against evil...
the "don't mess with the fed" comment should
have been the shot heard round the world....
( i missed it)
unfortunately leadership requires making the
tough decision of speaking courageously - let the
chips fall where they may....otherwise i fear
that lewis is merely an enabler....
kennedy was murdered by the oligarchs because
he tread upon their turfs....nixon likewise.
although the story is not over i am not convinced
that lewis will be able to do much more than
he has...
I stated that it should be clear (transparent) that he is being targeted for speaking up and being honest - that is the real tragedy. My point on IQ is the ability to connect the dots.
Targeting Ken Lewis would be welcome by Lloyd B. & Co. to take the spotlight off them.
I am sure there will be a sacrificial lamb and scapegoat to vent some of the public's frustration, we are looking at positioning and jockying by CEOs to avoid being the sacrifice.
lewis may indeed have a giant bullseye on his
forehead....it will be interesting to see how
long he lasts....
unless there is large scale prosecution industry
wide lewis would make a tasty scapegoat for
lloyd, hank, et. al....then we can all go back
to pretending that nothing has happened....
How many mysterious suicides do we have to see?
I wonder if that was foremost in KL's mind.
it most emphatically was....
the number of "suicides" related to the powerful
defies statistical odds...
william colby, jeremy boorda, vince foster,
the list goes on and on and on - and that is only
for the clintons....
I'm not sure he had that much of a choice... If BOA had a sizeable poo poo debt portfolio or was going to need a backstop from the tidal wave of consumer panic, then he had to play ball to keep the thing afloat. The only thing intestinal fortitude would have gotten him was a collapsed institution when the backstop wasn't there and they kept on picking favorites... and Paulson would have simply found a home for Merrill with some other company... (and forced them to pay more than it was worth to give his buddies a payday).
The huge wall street bonuses more often than not exist to cover margin calls within the big shot's personal accounts and side bets away from the exchanges.
Most of the heavy hitters were loading up their personal books with highly geared positions. Every player was a hedge fund.
This situation best explains why Government Sachs kicked MOST of its profits through to the troops with a skew towards the top.
Even though the politics are terrible; the corporation HAD to get cash out to the players so that they can de-lever.
We see the same dynamic at Sun Capital Partners. The personal cash thirst runs everywhere in the FIRE economy.
That's because he's a total rube..... He's one of them there down home country boys commin to the big city... know whatta mean....?
That's because he's a total rube..... He's one of them there down home country boys commin to the big city... know whatta mean....?
Good for the Judge. GS wasn't able to bride the judge like they did with the SEC.
I wonder how much bonus does GS pay the SEC each year for good work.
If we had about an hundred million more Rakoffs in this country we'd be in a whole lot better shape. Alas, he's severely outnumbered. Client #10 in the making.
If 91K is not a lot of money and under federal law as a 100% disabled veteran I am supposed to be compensated for my loss of earning capacity then I could extrapolate that my earning capacity should be calculated at 91K. I am sure that BofA, GS and the rest of the industry would be more than willing to provide the financial needs to fund the 100% disabled veteran compensation at a level consistent with their assessment of reasonable earnings...
I think a lot of people should use that phrase '£91K not a lot of money' to any and every bank that seeks to foreclose, try to enforce late payment charges, severance pay, and anything else it could be applied to.
Not a lot of money? It just goes to show what ignorance still abounds at the heads/hollow vessels of these companies.
Reminds me of the aristocracy before the French Revolution!
Liberty, Fraternity, Equality...
Nothing is so bad as something that is not so bad...
The Scarlet Pimpernel
There's also a possibility you haven't considered: SEC drops the suit.
I will believe it when the money is out of the bank.
Serious props to Judge Rakoff. I have a sense that he will not be bullied by the establishment; perhaps the relevance of those town-hall meetings are starting to sink in...good point
We just can not compete with the vast amounts of money being used to
influence decisions. The Rich says"
good articles; my newest bookmarked finance website http://www...
Kudos, Judge Rakoff!
If only this case could end with a criminal conviction and death sentence...ah, it was a good dream anyway.
Wall Street is the finance arm of the US Empire.. of course they are going to make more than everyone else, as they skim the cream off the top of this ludicrous government spending, whom in return for all their riches, they simply are required to buy more intrinsically worthless treasuries. It's just the same old unscrupulous leeches serving the state, not caring about the damage done to the country and its people.
The golden rule was destroyed when politicians stole all the gold. You won't find many with morals left in this country, especially among the power elite "professionals," who are just the old state-sponsored monopolists... Yet they somehow convince the people they have bleeding hearts and they are here to help. Tell all the executives, doctors, lawyers, career politicians, financiers, union organizers and all the other "professionals" to go leech off someone else, before we become another feces hole like South America. Anyone who obtains a license or a union membership is using a coercive anti-competitive authority to secure a market, and is therefore a monopolist, who is just as much responsible for this mess as the politician who gave them it.
BAC should receive no fine whatsoever. If someone needs to be fired that is fine, but it is crazy to punish shareholders for whatever happened.
Why not? They're the owners of the company. The buck stops with them. If you don't like it, sell. Who do you hold responsible? The owners.
I don't think we need to punish anybody. Print money. There's no accountability, only profitability.
To infinity and beyond!
Mary is trying to get this and all other fines directly ported to the SEC budget.
She feels that $1,000,000,000 is not enough -- Congress is too stingy.
Oh--I ate spinach last night and subsequently, I saw "green shoots" floating in my office bathroom this morning. I think I blew out an O ring in the process.We just can not compete with the vast amounts of money being used to influence decisions. The Rich says"
good articles; my newest bookmarked finance websihttp://www...
A part of me wants them to pay a huge fine, but in reality it will likely be shareholders that bear the burden. I do like the idea of firing someone though.
Also, I'm pleased to see someone with a little backbone here, I mean really, after that Chrysler fiasco I seriously wondered what value there was in law anymore.
As others have mentioned though, we'll just see how long this lasts. I would guess that perhaps some pressure might force this through more quickly.
Mary Shapiro should be working at the Drive through of McDonalds...I mean SERIOUSLY!!
Can someone get more WORTHLESS than this??
I heard the judge ordered a larger vice.
Rakoff and Richard Breeden got to preside over $750 million
in settlement funds for SEC vs. Worldcom - a portion of
which still has yet to be paid out to victims.
Rakoff knows $33 million won't last long. He wants more.
Thank you Judge Rakoff for not allowing Mary Shapiro to try to shove yet another reaming of the taxpayer under the carpet for her crony corporate friends.
Why does this woman still have a job? I have lost tremendous faith in the Obama administration that they are keeping her in this position. It is a horrible fit.
JAIL SENTENCES, not slap on the hand fines!
We want and deserve to see real justice!
For a land with so many guns!
we are just amazed at the lack of spine Americans are displaying while they are raped! Roll over we are not done with you weaklings yet.
"The home of the brave" lol
Watch it # 32418, or we will stop sending $ 40 million a month to your country to prevent you from having to eat goat poop three meals a day. We are looking for some place to dump cash for clunkers We can put them next to all our junk computer hardware that your kids play with.
you are a bit of a fag
Your mother wears army boots
Thanks to the Judge.. For the tiniest hope that you will not allow Mary Shapiro and her mindless army of cogs to run rough schod over our most basic RIGHTS once again.
Project Mayhem, may I humbly suggest the following assignment:
1) take out the biggest mortgage loan possible from a TARP bank using the $8k home buyer tax credit
2) lever up ~30:1 with 96.5% FHA financing
3) never make any payments
4) when foreclosure proceedings start, go to Home Depot and stimulate the economy by buying (on credit, of course, and don't make any payments) bags of concrete mix and pouring it down every drain in the house, and leave the water running rendering the collateral even more worthless than it is already. Get creative here, also strip all the wiring out of the house and sell for cash, etc.
5) buy some beer and other liquor with and sit back and laugh (and get drunk) as the banks take yet more writedowns and the dollar becomes worthless, making your mortgage debt less valuable than the alcohol, which will always hold some value.
Clearly the judge does not understand how important it was for BAC to be able to retain those gifted individuals who fucked MER up so bad to begin with. It's called containment. Or maybe quarantine is a better word.
Without the bonuses, these geniuses might have left BAC/MER and gone on to wreak their havoc at yet another institution, kind of like a financial Typhoid Mary, for which the taxpayer might have later been responsible. The devil you know and all that.
Judge Rakoff-the-Top may not have gotten the memo from Hank Paulson informing the judge just how close we were to financial Armageddon.
Ken Lewis is the financial industry's Jonas Salk, god bless him.
Real green shoots
Seems like Judge Rakoff wants to look at the big picture of what happened and may want to see if there are governance issues at BAC that need to be addressed.
He said "There are important legal issues that have been glanced at here but need to be briefed."
[BofA lawyer Lewis] Liman said of the total $3.6 billion in bonuses, Merrill was contractually obligated to pay $850 million. The rest was paid to 39,000 employees, for an average of $91,000, which was “not a lot of money,” Liman said.
Yeah, most likely 2.5 Billion split between 5 employees and the other 38,995 split the remaining 250 million, but it averages out to 91,000/ employee. nice try, lol!
glad someone speaks the truth
Freakin activist judges.
Liar's don't like people asserting thier right to know. It makes them less effective.
There's so many wonderfully intelligent and gifted and special people in the banking industry. It's odd how we have this huge struggle to both retain them and force them the hell out of our lives. I can't quite resolve whether the problem is that they are so special that we can't get rid of them or if the problem is people are threatening to kill them so they are being tight lipped to protect thier security. If they are so valuable than the nation will surely want to preserve them and protect them. Put them in convertibles and drive them around grassy gnolls all day while they do their work. If the nation is worried about thier security then they will be secure. Of course this might bring to light inherent contradictions between the real nation and the nation that the NSA protects.
Mary Schapiro was guided to her position in the SEC by New York's Senator Charles Schumer. She is there to protect his interests and Democratic campaign contributors. If you doubt that, start googling the history. I'll bet that both Schapiro and Schumer had not thought of independent judges with integrity. I hope that there are a lot of quesitons that Judge Rakoff asks and I hope that he demands answers of clarity.