SEC Inspector General: Yes, BoA Got Special Treatment

The WaPo reports that an SEC Inspector General report shows that the SEC gave Bank of America lenient treatment when it fined BoA for its funny business surrounding the Merrill Lynch acquisition, but did not place limits on BoA’s ability to issue securities that would normally be placed on a firm that violates securities law.

The inspector general found that the SEC showed leniency in the first settlement. He did not find that Bank of America’s status as a bailed-out bank affected the settlement’s price tag. Rather, he found that the SEC exempted Bank of America from other sanctions.

Like many of its competitors, Bank of America has long enjoyed a special status with the SEC that allows it to issue securities more easily.

Customarily, a firm that agrees to settle violations of securities law related to disclosures would lose this special status, thereby penalizing the firm with a lengthier and costlier process for issuing securities.

In settlement discussions with the SEC, Bank of America asked to retain that special status. The SEC, at first, declined, insisting that firms that violate the disclosure requirements of securities laws must suffer the consequences of those actions.

The agency reversed course in a last-minute meeting with Bank of America before the full commission voted to approve the settlement.

“In this meeting, BofA argued that the dire state of the financial markets made it critical that it be able to raise money quickly” by issuing securities, according to the inspector general’s report.

SEC officials decided to allow the bank to retain the special status because it had received taxpayer bailouts and “it would not be in the interest of the market or investors to prevent them from getting to the market,” according to the report.

This first settlement, btw, was the one Judge Jed Rakoff rejected, saying this of the settlement itself:

Overall, indeed, the parties submissions, when carefully read, leave the distinct impression that the proposed Consent Judgment was a contrivance designed to provide the S.E.C. with the façade of enforcement and the management of the Bank with a quick resolution to an embarrassing inquiry…

Mind you, this IG finding appears to represent the facade of oversight. In addition to finding the teeny fine and the way it was assessed to be no problem, SEC’s IG also had no problem with the way Treasury and the Fed were involved in the merger of BoA and Merrill Lynch.

The whole thing sort of makes you wonder about what other special treatment BoA has been getting all this time, all in an effort to avoid admitting that it is insolvent. Maybe Julian Assange can help us out there?

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  1. BoxTurtle says:

    It makes me wonder WHY BofA is getting the special treatment. Sure, it COULD be because of the massive amounts of cash they spread around Washington. But it could also be that BofA is in such a precarious state that even the slightest significant sanction might be enough to push it over the edge.

    Boxturtle (It could be both. Or it could just be great work on the part of Sen. Dodd)

  2. radiofreewill says:

    If BofA turns out to be the epitome of the Culture of Corruption on Wall Street, then what’s that say about the SEC? And especially the SEC IG?

  3. Gitcheegumee says:

    Well,could this have something to do with it>?

    Lewis told to seal Merrill deal — or else: probe – MarketWatchApr 23, 2009 … Paulson threatened to oust Bank of America CEO if he pulled out of … threatened to oust Bank of America Chief Executive Ken Lewis if the …
    http://www.marketwatch.com/…/paulson-threatened-lewis-seal-merrill – Cached –

    -Paulson admits to threatening Ken Lewis – Martin Kady II …Jul 17, 2009 … Hank Paulson admitted to threatening Bank of America CEO Ken Lewis when Lewis threatened to pull the plug on the Merrill Lynch merger last …
    http://www.politico.com/news/stories/0709/25066.html – Cached – Similar

    • readerOfTeaLeaves says:

      And recall, Gitchee, that BoA took over …Countrywide! And Countrywide was basically a generator of fraudulent loans. So…. what could Hank Paulson possibly know that we don’t, eh?

    • papau says:

      spot on – I was going to post the fact the Fed forced BofA to carry the rescue cost of Countrywide and Merrill despite their massive losses and liabilities, albeit the head of BofA wanted both companies before seeing the balance sheet and potential legal problems.

      I am told there exists memos stating the Fed would take care of BofA problems with either (although this guarantee if it actually exists has not stopped the market from cutting the valuation of BofA to reflect about a 350 billion hit from the mortgage problem (about 7 points on the value being about 350 billion if my math is correct – I’m too tired to check at the moment)

  4. Xboxershorts says:

    If BofA is that precarious, then BofA must be wound down and the parts spun off. Good fucking riddance.

  5. timbo says:

    Hey, why all the complaining? It’s okay. BofA is connected, so the owners and managers there can do no wrong. I know cuz I just read about it in the SF Chronicle.