Foreclosure Crisis has Cornered BofA in More Ways than One

October 29th, 2009 | Tags: Foreclosure Crisis

Bank of America is suffering due to the foreclosure crisis

The foreclosure crisis has cornered Bank of America in more ways than one. First it had to take over Merrill as the latter began to collapse and then it got embroiled in a controversy regarding payment of bonus to Merrill executives. The SEC filed a case against BofA but the latter decided to come to an agreement with it.

But after questions were raised the bank has agreed to waive the privileges of the law. This will make it mandatory for the bank to provide more relevant details about how much information it had when it took over the investment bank, said the federal regulators.

The court has yet to give its nod to the agreement. By it Securities and Exchange Commission would be permitted to look into further details regarding the failure of the bank to give information to the shareholders about the condition of Merrill Lynch and its potential losses.

Investigators appointed by the Congress together with Andrew Cuomo, the Attorney General of New York will be able to get access to the information that has been protected according to a correspondence the bank dispatched to the office of Cuomo.

Bank of America is hemmed in by legal suits and investigations initiated by legislators as well as regulators. Cuomo has been threatening bank officers and trying to get more information about those who knew the scenario prior to the vote by the shareholders approving of the take over on 5th December 2008.

BofA insisted that it had nothing to conceal. Spokesperson Larry Di Rita said, “Attorney-client privilege is a very important business principle, but given the pressure in several inquiries for further insight, we decided to waive it in this matter. We have nothing to hide and believe our actions throughout the Merrill Lynch acquisition were appropriate and in the best interest of our shareholders.”

In last September a federal judge did not accept the $33 million settlement Bank of America had reached with SEC. The allegation was that the investors had been misled about $3.6 billion that had been distributed as bonus to the employees of Merrill. Jed Rakoff, the District Court Judge blamed SEC for agreeing to the efforts by the bank to take advantage of attorney-client privilege and bypass disclosing what the executives together with the lawyers knew about its authority to pay these bonuses.

At the centre of the controversy is the CEO of Bank of America Ken Lewis who is about to retire.

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