by Jack Lee
In a way this is old news, but there is a new twist and so it should be aired. There are still a number of unanswered questions about the Bank of America (BAC) purchase of besieged Merrill Lynch that shareholders need to know.
First of all, why did Bank of America CEO, Ken Lewis, not disclose to the shareholders that Bank of America was being pressured by the Feds to buy Merrill Lynch in the first place? They deserved to know, they are legally entitled as shareholders, but this part was never brought up. So, why did Lewis still go ahead with the toxic Merrill Lynch deal after it was discovered there was another 12 million in liabilities not previously disclosed? Why didn’t Lewis seek additional bailout money to cover this bad deal if the Feds were forcing B of A to take? Other banks did that and got compensated for buying crippled companies, but the BAC shareholders got zip!
New Yorks attorney general said yesterday government officials pressured Bank of America Corp. CEO Ken Lewis to complete the banks purchase of Merrill Lynch.
The Boston Herald ran this story on the 24th of April 2009: “A letter from New York State Attorney General Andrew Cuomos office sent to congressional leaders and federal regulators said Lewis testified in February that former Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke threatened to oust Bank of Americas management if the bank tried to back out of buying Merrill Lynch.”
It seems Kenny-boy is not doing his job. A CEO with any guts would have told Hank Paulson to shove it and go public with the threats or he could have just resigned in protest of this bad deal, but he did neither and the worst part he kept the shareholders in the dark! This is outrageous conduct and for that alone Ken Lewis should be fired.
WSJ reported, “Under normal circumstances, banks must alert their shareholders of any materially significant financial hits. Disclosing losses at Merrill — which eventually totaled $15.84 billion for the fourth quarter — could have given BofA’s shareholders an opportunity to stop the deal and let Merrill collapse instead.”
To further support my belief that Ken Lewis needs to go, he and his CFO got cozy when Kenny-boy sold him his Porsche 911, a $100,000 plus sports car. The CFO is supposed to be a hard nosed realist, guiding the decisions of corporate officers on expenditures and protecting investors from excesses in said spending. These kind of deals are frowned up by Wall Street because it raises a genuine concern about ethics and if it turns out that Kenny sold his Porsche at a big discount… this is indeed a serious breach of ethics.
In protest I have sold my Bank of America stock and I wish others out here would do the same! There are better investments anyway. BAC stock has been in retreat for the past few days, but closed up .28 cents on Friday. BAC is considered by most to be among the big banks that have failed the Feds stress test. This is a confidential test where the fed rates banks for the financial strength and forward looking equity growth. BAC is consider very sick and as a result shares have fallen from the mid forties to be trading around $9 today. Maybe, $8 next month?
Bank of America recently said they expect serious losses from unpaid credit card debt. Add to this the damper put on the economy by Obama’s tax increases that will hit next year and the 2 trillion in debt that will spike inflation, we will find ourselves in a situation not unlike that of Japan that spent nearly 20+ years in recession because they would not allow the free market to make its own adjustments.
All this does not bode well for financials and B of A in particular. I sold my position on BAC due to an ethical concern, but it could just as easily been for financial reasons.