Bank Of America to Pay $150 Million Fine to Settle SEC Case

Breaking news...

Bank of America has agreed to pay a $150 million fine to settle a case with the SEC that it failed to disclose bonuses and other relevant information regarding the acquisition of Merrill Lynch.

Apparently there will be charges under the Martin Act against Mr. Ken Lewis, compliments of Mr. Andrew Cuomo.

The Martin Act, New York General Business Law article 23-A, sections 352-353, is a 1921 piece of legislation in New York that gives extraordinary powers and discretion to an attorney general fighting financial fraud. People called in for questioning during Martin Act investigations do not have a right to counsel or a right against self-incrimination. The act's powers exceed those given any regulator in any other U.S. state.

With a couple of his lieutenants, Mr. Blankfein could cover that bank fine suggested by the SEC with out of pocket money. But some banks are more equal than others, and GS would probably not condescend to subject itself to an SEC inquiry in the first place.

Mr. Lewis is an outsider, a non-NY banker. He could be food for the wolves, or the career of an ambitious AG.

If the Martin Act carries such power to safeguard the system, as Senator Bob Corker referenced yesterday in his critique of the Volker Rule, why don't they use it to probe the AIG scandal?

Non-Farm Payrolls Report Preview for January 2010

The markets breathlessly await the latest Non-Farm Payrolls Report for the US, which will be released tomorrow morning. January is the month in this report that contains the largest seasonal adjustments by far.

Here is a projection of what tomorrow's numbers may look like, and their historical context. The raw number unadjusted for seasonality may be a loss of around 4,000,000 jobs.



It is no accident that the BLS does the major adjustment to its Birth-Death Model in January. Keep in mind that the Birth-Death adjustment is applied BEFORE seasonal adjustment, that is, to the raw, unadjusted number.

Given that the expected raw number will probably be around 3.5 million jobs lost, and then adjusted to a headline number much closer to zero, adding even 380,000 or so job losses to that does not result in such an enormous adjustment in January.

In other words, the adjustment is largely adjusted away by the seasonality. Nonsense, hardly connected to the real world, but quite clever bureaucratic sleight of hand really.



Saying all this, it seems almost needless to stress that any projection of the headline number is a tough call in January, because the seasonality has such enormous latitude. More in the nature of a SWAG than a proper forecast.

Then there is also the matter of the revisions to the prior two months at least, and the possibility of a revision to the whole series going back two years, which sometimes occurs.

So, we'll look for a 'headline number' closer to zero than not, with a shade to the negative, maybe a loss of 20,000 or so. But we are very prepared to be surprised to the upside to a positive number, and downside to a loss of around 80,000. That speaks less to our inability to forecast, we hope, and more so to the arbitrary nature of the government's willingness and ability to fiddle with the numbers.



With pretty colors, it may look more like a sideways chop than a plunge, especially in light of a greater negative from December which will be adjusted but not higher.



And as for the reaction of US equity markets in anticipation today?

As I have stated before, the banks and their prop trading desks are always and everywhere screwing you, and frontrunning their better insights into the markets, even if only by a few milliseconds.

Watch the sovereign debt situation. This may place a heavy weight on the equity markets. But perhaps not just yet.

A Comparison of Unemployment In the European Union and the United States

The EU has its Spain and Ireland. The United States has Michigan, Ohio, and Nevada.

Italy Seizes Bank of America Assets In Derivatives Fraud Probe

"more than 519 municipalities that face 990 million euros in derivatives losses"

As the quote indicates, its a big problem, and Bank of America is not the only bank involved. But they are a big player, and actively using derivatives to 'rip customer's faces off' as they saying goes.

Why does this happen? Bank of America just announced they will be paying, on average, a $400,000 bonus per employee for this year past. Any fines or penalities that are incurred from offenses are treated as a cost of doing business.

Crime does pay in the short term. Especially if you can buy off the government and co-op the regulators of a major developed nation. When someone succumbs to fraud, there is a tendency to blame the victim. The purpose of the law is to protect the weak. Perhaps they could have been more vigilant, but this in no way diminishes the guilt of the perpetrator, and the likelihood that this is something they have been doing in many places over a period of time, with a growing level of sophistication.

People argue that if a nation sets rules for banks, they will just move offshore and keep doing business in any way that they please. This is intended to undermine any reforms and the rule of law.

It is possible to ban a company from doing business in your nation if it engages in unlawful practices. As noted here previously, Citi was engaging in trading practices in Europe and Japan that put them on the receiving end of bans for fraud.

Globalization is used as a rationale for stripping nations of their sovereign rights, and the people from their ability to rule and protect themselves in accord with their own beliefs and preferences.

Why people accept this nonsense when it applies to the financial sector is amazing. Well perhaps not, given the force of a steady propaganda that has been promoting it for the past twenty years.

The truth is ugly when you see it in plain black and white. The US is a relative safe haven for multinational corporations that engage in various forms of fraud and market manipulation around the world, like modern day privateers. It appears unable to regulate them because of widespread political corruption and the self interest of its monied elite.

Corporate privateering in partnership with the state has been a perennial problem in developing nations, especially in South America and the western Pacific. But the economic hitmen are ranging further and wider these days, in search of greater profits and new fields of plunder, and in developed nations. Iceland and Greece are one thing, but if a G7 nation like the UK falls prey to the banks, the reaction may be severe.

This theme of national sovereignty versus corporatism will gain more traction over the next five to ten years.


Bloomberg
Italy Seizes Bank of America, Dexia Assets in Derivatives Probe
By Elisa Martinuzzi

Feb. 3 (Bloomberg) -- Italy’s financial police are seizing 73.3 million euros ($102 million) of assets from Bank of America Corp. and a unit of Dexia SA as part of a probe into an alleged derivatives fraud in the region of Apulia.

The police are sequestering a further 30 million euros that the municipality was set to place in a fund managed by the banks on Feb. 6, according to an e-mail from the prosecutor’s office in Bari today. The prosecutor also asked that Charlotte, North Carolina-based Bank of America be banned from doing business with Italian municipalities for two years. A hearing is slated for next month.

Prosecutors allege that when the banks arranged swaps and created a fund that invests money the region set aside to repay 870 million euros of borrowings due in 2023, they misled the region about the economic advantage of the package. Banks skewed the swaps to their advantage to hide fees, the prosecutor said.

Apulia, located in the heel of Italy, joins more than 519 municipalities that face 990 million euros in derivatives losses, according to data compiled by the Bank of Italy. In Milan, prosecutors seized assets from four banks including JPMorgan Chase & Co. and UBS AG and requested they stand trial for alleged fraud. Hearings started in Milan this month...