Remember the huge bailouts to failing banks? Remember how urgently and desperately they needed the money and they were too big to fail? Remember how they paid out huge bonuses to their people with tax-payer money, and the anger that you felt, how you were shocked at the lack of shame these people show, although you know you should not be shocked by their shamelessness at this point? Remember the "enraged" congress members who pretended to care?
Well, finally someone's holding at least one of these banks' feet to the fire. S.E.C. was supposed to be the watchdog of financial institutions, but recently it seems to have failed miserably. So the executive branch failed at keeping these guys in check. The legislative branch has always been in cahoots with them. Now the third branch is taking charge. Thank heavens for independent, honest, "empathic" judiciary.
Here's the link to the NY Times story on the ongoing case and Judge Rakoff.
Judge Attacks Merrill Pre-Merger Bonuses
Bank of America and Merrill Lynch, Judge Rakoff said, "effectively lied to their shareholders." The $3.6 billion in bonuses paid by Merrill as the ailing brokerage giant was taken over by the bank was effectively "from Uncle Sam."
He asks some really basic, really commonsense questions. Too bad we had to wait so long:
Do Wall Street people expect to be paid large bonuses in years when their company lost $27 billion?" the judge asked.
The judge characterized the $33 million fine as "strangely askew" given the accusations made, the magnitude of Merrill’s losses and the subsequent bailout for Bank of America. The judge questioned the role of top executives at the companies, in particular Mr. Lewis and John A. Thain, the former chief executive of Merrill Lynch, both of whom signed off on a proxy statement to investors.
"Was there some sort of ghost that performed those actions?" Judge Rakoff said.
Oh the GHOST. It must have been the infamous "magic transactions ghost". Where are Ghost Busters when you need them?
Merrill had little choice but to pay many of the bonuses, Mr. Liman said. Of the $3.6 billion, Merrill had committed $850 million in the form of guaranteed bonuses. Mr. Liman said the rest of the money was shared among 39,000 workers who received average payments of $91,000 — though he did not mention that there were 696 people at Merrill who made more than $1 million in bonuses.
"I’m glad you think that $91,000 is not a lot of money," the judge said. "I wish the average American was making $91,000."
Average payment of $91K! That's their defense. It doesn't count because it's too little, but Judge Rakoff being a sane person with a sense of proportion shuts them up. $91,000 is A LOT OF money. These people have no idea what an average American makes, or how s/he lives, do they?
And finally, there's this gem:
The lawyer for Bank of America periodically whispered what appeared to be suggestions to Mr. Rosenfeld. One point that Mr. Liman emphasized was that the $3.6 billion was paid with funds other than the federal bailout money, and he said that if the bonuses were a problem simply because of the bank received aid, other banks that had received bailouts might face similar allegations.
Hahahahaha. Really? They paid the bonuses with OTHER money people. They didn't use government bailout money for the bonuses. You get it? They used money from another account. Oh, then I guess it's all dandy. Oh wait, also other kids did it, too. What? How old are they, 12?
Let's see what Judge Rakoff thought of this defense:
The judge was unmoved. "Money is money, the last time I checked," Judge Rakoff responded.
These activist judges! Didn't they get the memo that big business is always right? Thank you Judge Rakoff for being the voice of sanity and decency. I don't know what will come out of this case, but at least they have to answer some questions.