Bank of America Fined $33 Million: This Is Justice?
By Randall Holcombe on Aug 4, 2009 in Business, Money and Banking, Personal Liberty, Property Rights
Here’s the story: The Securities and Exchange Commission (SEC) accused Bank of America of concealing information from investors regarding bonuses paid to Merrill Lynch execs prior to the Bank’s take-over of Merrill. Bank of America has settled the issue by paying $33 million to the federal government, without admitting any wrongdoing. SEC officials say this is the largest penalty ever imposed for a failure to disclose relevant information in connection with shareholder votes. It’s almost too obvious to say, but I’m saying it anyway, because it is an important part of the story: The $33 million is paid by the owners of Bank of America, its stockholders.
So, as I read the story, the SEC says that Bank of America executives concealed information from its shareholders prior to the shareholder vote to merge, harming those shareholders. Therefore, the same shareholders who were harmed by the concealment now have to pay another $33 million. Is this justice?
Of cause not, jail time would be justice.
And now the securities and banking industries want us to believe them and move on.
Sad
john | Aug 5, 2009 | Reply
It is EXACTLY what goes for justice in this country these days.
daddysteve | Aug 10, 2009 | Reply
Evidently the judge agrees with you!
John | Aug 11, 2009 | Reply
Thanks for the comment, John. This is too bizarre! The TARP money has to be paid back if Bank of America hopes to gain its independence from federal ownership, so ultimately it won’t be the taxpayers who will pay the fine, as Judge Rakoff fears. Money is fungible, so if the $33 million is paid now, it’s hard to say where those exact dollars came from. Assuming the TARP money is repaid, it will be the stockholders, not the taxpayers, who will pay the settlement. The judge agrees with me part-way, by questioning where the money will come from, but he’s concerned the taxpayers will pay it while I’m concerned the stockholders will. This probably deserves a new blog post.
Randall Holcombe | Aug 12, 2009 | Reply