Uh oh, Bank of America. Some pretty damning emails leaked out of Congress yesterday about what BofA executives knew about Merrill’s massive losses several weeks before the shareholder vote was held before that information was released. “Read and weep” wrote the chief accounting officer in an email in early November estimating losses at more than $5 billion.
— MIT economist Simon Johnson writes that “Just when our biggest banks thought they were out of the woods and into the money, the official consensus in their favor begins to crack.” He points to Paul Volcker’s dissent in the pro-banks Obama administration, but more critically, Bank of England head Mervyn King’s assertion that the too-big-to-fail banks must be broken up.
— If there’s a white-collar defendant or criminal in the news, odds are good that The Wall Street Journal op-ed page’s Holman W. Jenkins, of the “backdating is good” school, is going to defend them or retroactively exonerate them. Today, he takes up the banner for Bear Stearns’ Ralph Cioffi and Matthew Tannin, whose hedge funds’ implosions in 2007 were the canaries in the coal mine for Wall Street. Remember, these are the guys who were trashing their holdings days before telling investors everything was zip-a-dee-doo-dah.
In the process, Jenkins lets Enron’s Ken Lay (!) off the hook and lays the groundwork for future excuse-making when or if another Ken, this one Lewis, gets his papers (see the first item above). This is all too bad, not just for obvious reasons, but because Jenkins misuses his top while making a solid point in the second half: That pure chance has a huge role in whether a company is successful or not. But rather than make that point in the service of arguing down stratospheric salaries for executives and the like (of course not), Jenkins contorts his argument to excuse corporate misjudgments.
And that’s not to mention the ridiculous straw man Jenkins throws out about Ken Lewis: That the media are out to get him because he overpaid for Merrill Lynch when he could’ve had it for far less days later. Sure that was stupid, but um, I think he’s in trouble for withholding critical information to shareholders, not just for boneheaded business decisions.