Congress demands details on Bank of America's deal for Merrill Lynch
Everyone wants to weigh in on the Bank of America (BAC) acquisition of Merrill Lynch and the subsequent disclosures about the deal. The SEC filed a case against the bank that was supposed to be settled, but a federal judge rejected the settlement. N.Y. Attorney General Andrew Cuomo has subpoenaed five B of A board members. And, for reasons that are hard to fathom, even the FBI and Justice Department want to review details of the transaction.
Add to that long list the House Committee on Oversight and Government Reform, which has told the bank that it cannot rely on attorney-client privilege to withhold details of its plans to distribute bonuses to Merrill employees or its knowledge of huge Q4 2008 losses at the brokerage firm.
An exclusive report in The New York Times reveals that U.S. Rep. Edolphus Towns (D.-N.Y.), who chairs the committee, said "the bank must divulge when it became aware of the enormous losses at Merrill last year." Towns also wants to know what legal advice management got about its plans to tell shareholders about the information.
The presence of Congress in the investigation could hurt the bank's efforts to turn itself around. B of A management will spend hundreds, if not thousands, of hours working on its defense against all the charges from these many sources. The bank will also spend millions of dollars on legal fees to help it work through the information that it will have to give to all the various government bodies that are investigating it.
The questions surrounding B of A's knowledge of Merrill losses and the bonuses paid to Merrill employees are entirely legitimate. But it would make far more sense for shareholders, including the federal government, if all these investigations could be funneled through a single agency, probably the Justice Department. B of A has enough problems handling operating issues. A large number of investigations, all trying to get at the same facts, ultimately hurt the taxpayers who have money invested in the bank's future.
Douglas A. McIntyre is an editor at 24/7 Wall St.