One on One with Richard Bove, Banking Analyst at Rochdale Securities
Monday, August 03, 2009
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SUSIE GHARIB: A management shake-up and a $33 million SEC settlement at Bank of America today. The banking giant paid the fine to settle a complaint that it misled investors about billions of dollars in bonuses paid to top executives at Merrill Lynch after B of A bought the brokerage. The bank also shuffled its senior managers, hiring former Citigroup executive Sallie Krawcheck to run B of A's global wealth management unit. That puts Krawcheck firmly in the race to succeed CEO Ken Lewis. We begin our coverage tonight with Darren Gersh and more on that SEC fine.
DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: If a statement could breathe a sigh of relief, you'd have heard it from Bank of America today. The company did not admit or deny the Securities and Exchange Commission's charges, but a bank spokesman called the settlement a constructive conclusion. Legal experts said it was worth noting the SEC did not charge Bank of America with fraud. Finance Professor James Angel says a fraud charge would have triggered much stiffer penalties.
JAMES ANGEL, FINANCE PROFESSOR, GEORGETOWN SCHOOL OF BUSINESS: The fact that it was misleading and that they aren't arresting people for securities fraud shows that they may really think that it really was more of a paperwork error than an intentional scam on the public.
GERSH: Regulators charge the documents Bank of America sent to investors explaining its deal to buy Merrill Lynch were false and misleading. That's because Bank of America said no bonuses would be paid at Merrill without B of A's approval. Bank of America did not disclose $5.8 billion in bonuses had in fact already been approved for payment to Merrill executives. Members of Congress have spent many hours looking into charges bank regulators pushed Bank of America CEO Ken Lewis into a shotgun marriage with a faltering Merrill Lynch. Congressional critic Darrell Issa says this settlement wraps up just one part of that controversy.
REP. DARRELL ISSA (R) CALIFORNIA (BY TELEPHONE): It doesn't reduce the fact that this was a sloppy job done quickly at the bequest, to a great extent of the government that was more interested by the statements of Bernanke and Paulson. They were more interested in a global market meltdown than they were the accuracy of this merger.
GERSH: With the fine today, Angel says the SEC is now sending a new message.
ANGEL: It sends a strong signal to deal makers everywhere, you really need to disclose everything.
GERSH: And it serves as a reminder that what Angel calls the bonus culture is as controversial as it has ever been. Darren Gersh, NIGHTLY BUSINESS REPORT, Washington.
