Creative Destruction

Paulson and Bernanke: Indictment Time? – The Market Ticker.

Under normal circumstances, banks must alert their shareholders of any materially significant financial hits. But these weren’t normal times: Late last year, Wall Street was crumbling and BofA faced intense government pressure to buy Merrill to keep the crisis from spreading. 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.

“Isn’t that something that any shareholder at Bank of America…would want to know?” Mr. Lewis was asked by a representative of New York’s attorney general, Andrew Cuomo, according to the transcript.

“It wasn’t up to me,” Mr. Lewis said. The BofA chief said he was told by Messrs. Bernanke and Paulson that the deal needed to be completed, otherwise it would “impose a big risk to the financial system” of the U.S. as a whole.

I generally agree with my friend Karl, but I think he sometimes goes a bit too far with his calls for prosecutions. However, in this case he is spot on.

I will take a cue from TJIC and say, “Rope!”. (Rope for Paulson & Bernanke. Lewis, not being a government agent, doesn’t deserve rope, just jail.)