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Bank of America is trying to convince government regulators that it is solvent enough to repay the government's rescue funding. Here's how one financial analyst characterizes the situation:
“What the bank is trying to show is that it’s come back to health and that it’s operated solely as a private entity in the marketplace,” said Richard X. Bove, a banking analyst at Rochdale Securities. “But the bank is still under this enormous political pressure from Congress, the S.E.C. and the attorney general of New York.”But of course "political pressure" isn't quite the right way to characterize the situation. Political pressure is when Sen. Russ Feingold tells the president he's not going to vote for more troops in Iraq. Bank of America, meanwhile, is under investigation for breaking the law:
In August, the SEC accused Bank of America of concealing from investors the plans to pay billions of dollars in bonuses to employees of Merrill Lynch, the troubled Wall Street firm it bought at the peak of the financial crisis. Bank of America agreed to settle, without admitting or denying charges.But Judge Jed S. Rakoff of the Southern District of New York rejected the settlement, saying it suited the immediate interests of the SEC and Bank of America, but neither the public interest nor that of Bank of America's shareholders.Now the S.E.C. is going to trial, New York AG Andrew Cuomo is planning to file charges, and Congressman Edolphus Towns is expanding his investigation. Bankers love to complain about all the pressure they face from regulators (even after the government took extraordinary steps to bail them out), but the reality is that pressure generally comes when they act like criminals. Lying to shareholders and blowing taxpayer money on extravagant bonuses are indicative of bad management, not problematic regulation.
-- Tim Fernholz
