FedUpUSA

Archive for the ‘losses’ Category

“…. as a result of a clearing member default at CME Group”

Except….. now it appears that’s not true any more, right?

The “Trends Journal” says it has uncovered critical information that – in light of the MF Global bankruptcy – casts doubt on the fitness of CME Group to serve as a trustworthy derivatives and commodities exchange, and on the credibility of its Executive Chairman, Terence Duffy.

The “Trends Journal” says not only has the scandalous MF Global bankruptcy (the eighth-largest in US history) wreaked financial havoc on thousands of individuals, it has single-handedly destroyed faith in the commodity markets. CME’s reputation as the financial Rock of Gibraltar, upon which the commodity markets are anchored, has now been undermined. By its recent actions, CME’s claim of being committed to guaranteeing the transactions undertaken by its members has been called into question.

As recently as 2010, Terrence Duffy boasted, “No customer has ever lost a penny as a result of a clearing member default.”* Moreover, in the same press conference, Duffy stated unequivocally, “Since we are the guarantor of every transaction that happens in our markets, we have to guarantee the performance of each and every one of these contracts … To do this, we hold more than $100 billion of collateral to support the transactions that are being done on our markets.”

So let’s ask the question: What’s the truth and why should anyone be trading through an allegedly transparent “guarantor” of contracts when segregated customer funds wind up “missing”?

It is at times like this that we find out if the alleged transparency and exchange trading guarantees actually mean something.  I have long been a strong proponent of the regulated futures and options markets on the premise that even during severe events like 1987, 2000 and the 2008 crashes — even when the solvency of clearing members has been called into serious question (or they’ve failed outright!) nobody has gotten rooked as a consequence.

That is the function of a regulated and transparent exchange.  The regulation of margins and supervision of the cash that backs transactions and provides collateral against non-performance is the primary function of such an institution.

It is not clear at this point point exactly what happened with MF Global.  But this much is quite clear — the rapid transfer of open positions to other firms along with the cash margin deposits held on behalf of customers to guarantee trades did not happen in a reasonably-expeditious (like “right now”) basis when MF Global failed.  Some customers were forced to come up with a second margin deposit and if they were unable to do so their positions were forcibly liquidated.  Significant amounts of that margin money appear to have disappeared outright, despite the fact that it is the CME’s job to guarantee performance through the enforcement of margin deposits.  Indeed, they call these margin requirements performance bonds — because they are.

Well, if they were and are performance bonds then perhaps CME would like to explain why they did not demand a full accounting of them on a nightly basis from all clearing firms (including MF Global), how it is that MF Global managed to evade proving up their customer performance bonds, and why their failure to supervise the presence and legitimacy of these performance bonds should not fall on them.

If this alleged supervision and guarantee is in fact worthless then the role of a neutral “referee” that CME Group has asserted has been abdicated and there is no reason to believe that any transparency, any guarantee of fairness in execution is real or any alleged “performance bond” money actually exists.

Indeed, the entire purpose of CME’s existence has been rendered null and void by their own hand.

The entire premise of my endorsement of exchanges — and for forcing derivative contracts onto exchanges as a means of de-fanging the CDS monster — rests on the integrity of this performance bond process.  An exchange, due to the fact that it is paid a relatively small amount of money to handle each contract that passes through it, has a very strong incentive to make sure nobody is cheating and that all margin money is actually there because if they don’t they face losses that are radically outsized when compared to the fee they collect for facilitating the trade itself.

It appears, however, that in the MF Global case this supervisory function failed.  That’s bad.  What’s worse is that it appears CME Group has, at least thus far, successfully dodged taking responsibility for that failure and the apparent non-presence of alleged “performance bond” deposits that in fact disappeared.

There are only two possibilities: Either CME knew the alleged “performance bonds” were not present or they were tricked into believing they were present when they were not.

CME’s thus-far successful dodge of responsibility to make good on these alleged “performance bonds” that were not where they were represented to be makes a mockery of the premise that an underwater position is fully collateralized by the customer who has the losing position and thus the customer with the winning side of that trade will, with certainty, get paid.

That is the entire purpose of requiring margin deposits in the first place!

If we are to have actual regulated markets and a known safe place to trade where customer “performance bonds” actually mean something that must not occur.  If CME was either tricked or worse, allowed MF Global to close a single day’s trading book while the allegedly deposited customer performance bond funds were missing then CME must promptly make good on the missing funds as this is the premise on which a regulated exchange rests!

The literal existence of safe and sound markets is at stake here.  If CME successfully dodges  responsibility for failure to actually guarantee that performance bond funds are real and are where they are represented to be in each and every case then no end user, industry group or other person can reasonably believe that their trades are in fact “money good” anywhere on any United States exchange.

PERIOD.

A curious thing happened to a middle-aged Frenchman in Monte Carlo last year. He had unexpectedly received a year-end bonus of 10,000 from his employer, and decided to visit Le Grand Casino for a weekend, where he could relax and gamble with his new found wealth. Since his wife and daughters were visiting his stepmother that weekend, he would be able to focus entirely on making some money. His first night was judiciously spent at the Roulette tables, where his sharp instincts and calculated patience presumably allowed him to double his allotted wealth in just five hours. It was an excellent night for the man, who was now 10,000 richer, and he spent the next afternoon lounging in a cabana at the hotel’s pool.

That night, the man locked away the initial 10,000 in his room’s safe and took the rest back down to the casino floor, where he quickly locked up a seat at his favorite Roulette table from the night before. His playing strategy remained the same as always – place a minimum bet on two out of three columns, switching one column each time he won a bet, and sitting out one roll each time he lost - no deviations from the strategy whatsoever. After a series of wild fluctuations in his bankroll, the man was left with only two more bets, and he decided to place them both on black. The tiny steel ball deftly rolled around the wheel for several revolutions and tensely bounced between a few numbered slots before finally choosing to settle on number 21 - red.

The man quietly finished his glass of red wine, shuffled up to his room and lay awake in bed. He couldn’t help feeling extremely frustrated about the events of that evening. Frustrated with the insidious game of roulette, with his own careless betting decisions, with his “bad luck”, with the other players who had won, with the man spinning the little steel ball, with the tiny ball itself. He kept replaying the spins in his mind, fantasizing about the money he would still have in his pocket if he had just made a few different decisions.

What especially haunted him was the would-be expression on his wife’s face when he unexpectedly brought home 20,000. The 10,000 bonus would surely lift her into a state of pleasant surprise, but the man speculated that, if he had managed to double that bonus in just two short days at the casino, her pleasant surprise would be magnified ten-fold into a state of blushing pride .

On his journey back home the next day, the man began to realize just how strange his lingering feelings from the night before were. After all, he was exactly even from gambling at the end of his trip, and had actually been comped for a night’s stay at the hotel and a few meals. He had even expected to lose a bit of money going into the trip, since Roulette laid players some of the worst odds in the Casino. The man reflected on the fact that his brief excitement from winning 10,000 on the first night had paled in comparison to his prolonged dismay from losing that same 10,000 on the second night. It was indeed a curious psychology that continued to puzzle the curious man, so he decided to do some Internet research when he arrived home. Hopefully, he thought, a new and more fundamental understanding of this psychology would finally put his mind at ease.

It didn’t take too many Google searches before the man came across the concept of “myopic loss aversion“, which explains that people are significantly more likely to experience pain or displeasure from losing a monetary amount than excitement or pleasure from winning that same amount, especially when they frequently evaluate financial outcomes. This disproportional dynamic is obviously powerful when it involves money that one can barely afford to lose, but it also forcefully applies to losses that may be small relative to an individual’s bankroll. Even the multi-millionaire corporate executive who drops fifty grand gambling at a Vegas poker table will be beating himself up soon after, despite the fact that he will most likely make  multiples of that by the end of the year (or at least he believes that he will).

Many of us may be familiar with the painful/shameful process of losing significant sums of money invested in the “wrong” place at the “wrong” time, but it is much more difficult to imagine the negative reactions produced when an entire economy of millions is serving up losses which, in a few short years, will threaten to wipe out all of the financial gains accumulated over decades. After the most potent “winning streak” in human history, the majority of American society has been blindsided by equally potent losses, which continue to mount and show no signs of abatement:

• It is estimated by Zillow that average home prices in the US have declined ~27% from their peak in June 2007, effectively destroying $9.8 trillion  worth of homeowner’s equity (in an economy worth ~$14 trillion). [1]
• About 15.7 million homeowners have negative home equity (owe more on home than it is worth), representing a whopping 27% of all mortgaged single-family homes. Joseph Stiglitz infers that these trends will lead to a total of about 9 million people losing their homes through foreclosure between 2008-2011. [2].
• According to officially under-stated statistics, the unemployment rate jumped from 5% in 2008 to ~9.6% in 2011, and the U-6 number puts it at ~16.5%. [3]. The official rate is only that “low” because millions of people have given up looking for jobs over the past few years (magically removing them from the official labor force), and millions of other people with part-time, low-paying jobs are counted as employed (26% of new private-sector hires are temporary [4]).
• Between 2006 and mid-2008, Americans had lost about 22% of total retirement assets or $2.3 trillion, and $2.5 trillion in savings and investment assets. [5]. Although a decent amount of this value has been recovered during 2009-10, it has mostly gone to a significantly smaller percentage of people who have held on to such assets and has only been achieved on the backs of taxpayers, who now owe interest on an additional $4 trillion+ in public debt (plus a few more trillion if we include the GSEs). [6]. When the markets crash again, that public debt will be money completely wasted for a large majority of Americans, if it is not considered to be already.
• Credit card defaults hit a near-record rate of 11.4% in 2010, more than double the rate in 2007, and the average late fee had risen almost 10% from $25.90 in 2008 to $28.19. [7].
• Public employees face at least a $2.5 trillion state pension shortfall mostly accumulated since 2008, and the gap can only be made up through drastic cuts to pension benefits, layoffs and cuts to public services for all other citizens. [8].
• Profits of most small businesses (unincorporated organizations such as partnerships and sole proprietorships) have fallen 5% in the last two years. [9], [10]. These businesses employ over half of all private sector employees and have created 64% of net new jobs over the last 15 years. [11].

There are many other losses that have befallen the American people over the last few years on top of those listed above, and recently they have also seen the costs of necessities increase. The real interest burden of private and public debt continues to weigh heavily on businesses, consumers, patients, students and civil servants. State welfare programs such as unemployment insurance, food stamps, Section 8 and Medicaid provide temporary crutches to dull the searing pain, but it is clear that these programs only continue to exist on recklessly borrowed time and will be selectively restricted to the American people in short order. The federal retirement program of Social Security, on which many retired Americans have come to rely on, is at the brink of insolvency (the difference between outlays and receipts for the SSA in 2010 was $76 billion [12]), and Medicare isn’t looking too much better.

American politicians and officials are promising their constituents that this value lost will be recovered, but most of them remember too many broken promises to find any comfort in hollow words. When structural shortages of oil imports become a factor, Americans will have systematically lost not only their financial investments, but their entire way of life and lofty perspectives of reality. Sooner rather than later, we will be forced to fully experience the penetrating anguish and regret associated with unprecedented loss, as the tiny steel ball ceases to bounce around and settles in its pre-determined slot. It is at this time which we will realize that there is only a thinly-veiled political fiction separating us from the furiously desperate protesters in the crowded streets of the Middle East.

The Automatic Earth

I hate bankers and so should you.  Why? Because bankers steal a little bit of Christmas cheer
every year. For the past several years, bankers have stolen a lot of Christmas
cheer. Like the Grinch from Dr. Seuss’s famous children’s tale, How the Grinch
Stole Christmas, bankers have hearts two sizes too small, and by means of
burglary, they do their best to deprive everyone of Christmas every year. Only
unlike the Grinch, despite stealing from people every year, bankers never learn
and never reform, they never return to the people the vast amounts of money
they stole from them, and they are cold-hearted and arrogant enough to claim
that they are doing “God’s work” (as stated by Goldman Sachs Chairman and CEO
Lloyd Blankfein, when in reality, they do much more harm to society as a whole
than good. And this makes the majority of bankers worse than the even the
loathed Grinch himself.

Since the institution of banking was founded, bankers have
been guilty of deceit, fraud and theft. During Biblical times, “Jesus went into
the temple, and began to cast out them that sold and bought in the temple, and
overthrew the tables of the moneychangers [bankers]..And he taught, saying unto
them, Is it not written, my house shall be called of all nations the house of
prayer? But ye have made it a den of thieves.” (Mark 11:15-17)

Fast forward almost a couple thousand years later, and
bankers were still committing the same theft. In fact, over a period of
eighteen hundred years, bankers learned nothing from being cast out by Jesus
from the temples, and they continued to commit such questionable acts of
morality that even a man of very questionable character himself showed nothing
but contempt for them. Though historians noted that former US President Jackson
committed numerous hateful acts against Choctaw, Chikasaw, and Cherokee
American Indians, Jackson despised bankers so much, that in front of a
delegation of bankers, he stated the following:

“Gentlemen, I have had men watching you for a long time, and
I am convinced that you have used the funds of the bank to speculate in the
breadstuffs of the country. When you won, you divided the profits amongst you,
and when you lost, you charged it to the bank. You tell me that if I take the
deposits from the bank and annul its charter, I shall ruin ten thousand
families. That may be true, gentlemen, but that is your sin! Should I let you
go on, you will ruin fifty thousand families, and that would be my sin! You are
a den of vipers and thieves. I intend to rout you out, and by the eternal God,
I will rout you out.”

Fast forward another one hundred and eighty years, and we
discover that bankers have failed to evolve even a tiny iota from their
deceitful nature. When ex-CEO and former US Secretary Henry Paulson lied to the
American people and to US Congress by asking for more than $800 billion of
funds for the purposes of helping American home owners and then committed the
ultimate bait-and-switch fraud by handing this money to his banking friends, he
epitomized the very warning Andrew Jackson levied against bankers in the
1800’s: “When you won, you divided the profits amongst you, and when you lost,
you charged it to the bank.” In this case, Paulson acted beyond the normal
level of immorality of bankers, and charged the banks’ losses to every single
American citizen.  Unlike the
Grinch, who repented from the error of his ways over a period of a few days,
bankers have refused to repent for the unsound monetary system they have
created for more than two thousand years!

To understand why Jesus threw bankers out of the temple, why
a former governor of the Bank of England stated that banking “was born in sin”,
and why Andrew Jackson, a focus of much hatred and contempt among American
Indians, viewed bankers as so immoral, that despite his own immense character
flaws, he made it his own personal crusade to throw out all bankers from US
government, one must understand how bankers continually rob all citizens of
their wealth every day. To state that bankers lie, deceive, rob and steal from
all citizens every day is not an exaggeration. The means by which they do so
today has drastically changed from the means they employed centuries ago, so
this is why so few people understand that bankers continually rob them.  Most people don’t understand that
bankers ensure the continual devaluation of the purchasing power of all money
in the system by not only literally creating money out of nothing but also by
creating money as debt.

This process, to which they cleverly assign the word
“inflation” is in reality a tax that constitutes a direct theft of your
savings, and no different than the tax British monarch King George imposed upon
the American colonists that triggered the American Revolution. The bankers have
only changed the mechanism by which they collect this tax, and the word that
they use to describe this mechanism. In America, this hidden tax of inflation,
which is a euphemism for the devaluation of the currency that sits in your
savings account, is directly responsible for the following situation that Eric
Schlosser described in his national bestseller, Fast Food Nation:

“It used to be, even in low income families, that the father
worked and the mother stayed home to raise the children. Now it seems that no
one’s home and that both parents work just to make ends meet, often holding
down two or three jobs. Parents increasingly turn to the school for help,
asking teachers to supply discipline and direction.”

The above paragraph described the family life of many
families that lived in Middle America almost a decade ago. Due to an unsound
monetary system that has led to relentless devaluation of the US dollar, the
situation described above will explode in intensity and magnitude over the next
five years, and affect everyone in America, no matter your income level and
socio-economic status. As the US dollar continues to lose purchasing power,
despite a current possible extended rally against the pound and Euro,
middle-class America will sink into the ranks of the poor. If the world operated on a sound monetary system, even in low-income families, the mother could still stay home to raise the children. Today, even in middle-class families, thanks to bankers, the mother does not have the option to stay home and raise the children. When the situation
of both parents working two or three jobs and their kids attending high school
while working 20+ hours a week is still not enough to make ends meet, crime
will explode in America during the next five years. It is the critical problems
of these very families that the bankers are creating through their monetary
policies that will come home to roost in America.

In reality, I don’t hold hatred in my heart for anyone.
Christmas is a time for forgiveness and none among us are infallible and none
among us are without sin. Yet, to be forgiven, those that continually do wrong
must repent, and bankers have yet to do anything that demonstrates that they
have even the slightest amount of regret and remorse for the economic upheaval
and chaos that they have created throughout the world in recent years. The
rich, though they may not care to understand the tale of How the Bankers Stole
Christmas now, should make it their prerogative to understand this as soon as
possible. Why? The current course the bankers have set us on has ensured that
the rich will soon become victims of desperate masses of people in their
country that will see a huge degradation in their quality of life due to the
recent monetary policies bankers have elected to impose upon their
citizens.  When large portions of
the middle class are destroyed, masses of people that never considered stealing
before, will steal and loot due to the simple instinct of survival, and a great
battle between “the haves” and the “have nots” will ensue in future years in
many developed countries, as crazy as this concept sounds today. Should the
people choose to understand “How the Bankers Stole Christmas”, the
inevitable massive increase in crime that will accompany the sinking of the
middle class into poverty can be avoided.

If instead, everyone chooses to buy into the propaganda of
the bankers, then this same scenario, as crazy as it sounds today, will come
true in the future just as the “crazy” stock market crashes I predicted in 2006
eventually materialized in 2008. 
And the biggest culprit of this shameful scenario, should it
materialize, will embarrassingly be our own refusal to see the truth about how
bankers have commandeered today’s “modern” monetary system for their own
benefit, and their own benefit only, to the detriment of every single citizen
they claim to be helping. If one doubts the enormous reach of banker’s
tentacles into governments, then perhaps now is a good time to review former
IMF Chief Economist’s Simon Johnson’s brilliant article, “The Quiet Coup”.

From Bloomberg, Citigroup Stock Sale Discount Prompts Treasury to Delay Disposal of Stake :

Dec. 17 (Bloomberg) — Citigroup Inc.,
the last of the four largest U.S. banks to seek funds to exit a
taxpayer bailout, raised $17 billion by selling stock for a price so
low that the U.S. delayed plans to shrink its one-third stake in the
lender.

Citigroup sold 5.4 billion shares at
$3.15 apiece, less than the $3.25 the government paid when it acquired
its stake in September. The New York-based bank said the Treasury won’t
sell any of its shares for at least 90 days.

Investors demanded a bigger discount from Citigroup than Bank of America Corp. or Wells Fargo & Co.,
which together raised more than $31 billion this month to exit the
Troubled Asset Relief Program. Wells Fargo, which trumped Citigroup’s
bid to buy Wachovia Corp. last year, leapfrogged its rival by
completing a $12.25 billion share sale Dec. 15. JPMorgan Chase &
Co. repaid $25 billion in June.

“The market cast its vote and they’re low down on the ballot,” said Douglas Ciocca,
a managing director at Renaissance Financial Corp. in Leawood, Kansas.
“Citigroup needs to show steps to reinstall the quality of the brand.”

With
the sale, Citigroup’s common shares outstanding increased to 28.3
billion. That’s up from 22.9 billion as of Sept. 30 and 5 billion at
the end of 2007.

“More shares outstanding means less value per share,” said Edward Najarian,
an analyst at International Strategy and Investment Group in New York,
who has a “hold” rating on the shares. “The whole structure of their
deal to pay back TARP wasn’t very good for common shareholders and that
is being reflected in the pricing.”

I think
one of the most important points are being missed. Most of these banks
swore that they didn’t need TARP. Despite this, in order to return it,
they must go back out to the capital markets. Why do you have to hit
the market to return a loan that you said you didn’t need, unless you
needed it? This obvious lie has went unchallenged.

It gets
worse. Citi is diluting the hell out of it shareholders, as well as all
of the other TARP banks that are selling shares. Some may even be
taking on debt. They are doing this primarily to gain the freedom to
declare bonuses at higher rates despite uncertain credit condition
surrounding the toxic assets that caused the problem in the first
place. Why in the world would any lender or shareholder agree to
dilution and/or higher debt service “primarily” to pay higher bonuses
to employees in the highest compensated (as a percent of net revenue)
industry in the world???

Imagine if you ran this business, you
have rocky times during a recession with revenues in nearly all aspects
of your business down save the blatant risk taking of trading, and you
go to your bank and say I need a big loan so I can pay myself a $20
million bonus increase.
Do you think Citibank would give you this
loan? They expect it from their shareholders. The same goes for
Goldman, JPM, BAC, etc.

Also from Bloomberg: Weak Banks Should Face Curbs on Bonuses, Dividends, Basel Regulator Says

Dec. 17 (Bloomberg) — Global regulators urged national
authorities to limit bonus and dividend payments by banks with
weakened capital safety nets as part of proposals to reduce
risks to the financial system.

Banks should increase the quality of the capital they hold
to cope with losses, the Basel Committee on Banking Supervision
said in a report on bank capital and liquidity published today.
Banks with depleted capital buffers shouldn’t use predictions of
recovery to justify generous dividends to investors and
employees, the committee said.

Global regulators have been wrestling with plans to
increase supervision of banks following the worst economic
crisis since World War II. The Group of 20 Nations agreed in
April that banks should be required to hold more and better
quality capital to reduce risks to the financial system.

“It’s not acceptable for banks which have depleted their
capital buffers to try and use the distribution of capital as a
way to signal their financial strength,” the committee’s
statement said. “The proposed framework will reduce the
discretion of banks which have depleted their capital buffers to
further reduce them through generous distributions of
earnings.”

It’s amazing that this even needs to be said.

It was just a matter of time before the administration’s covert plan of rewarding bank execs for massive failure by allowing them to load up their balance sheets with record risk once again, while paying out historic bonuses, blew up in Larry Summers’ face. Today’s attempt by the government to not only allow the failed Citi management team to pay itself an infinite amount of money more than it deserves for destroying one of America’s landmark companies (why the hell is Vikram Pandit still in charge of the Titanic?) but to pretend that it “generated” another taxpayer win by selling off its shares at a profit, was aborted after hours, when Citi could barely find enough interest to sell $17 billion at the embarrassingly low price of $3.15, below that government’s cost basis. This will preclude Obama from making a TV appearance tomorrow of how the US taxpayer made even more money by backstopping Moral Hazard. What the US taxpayer however did do, is funnel money straight out of its pocket, into that of Vikram’s worthless lackeys. We somehow doubt this will make the teleprompter of whatever it is Obama will be praising in his TeeVeethon tomorrow.

More from the WSJ:

The U.S. government reversed plans to begin reducing its trimming its 34% stake in Citigroup Inc. (C) after investors balked at buying the bank’s shares, according to people familiar with the situation.

Citigroup was nearing completion late Wednesday on the sale of about $17 billion of newly issued shares. But the offering encountered such a lukewarm response that Treasury Department officials decided to hold off on selling any of its shares until next year, these people said.

At the expected sale price of $3.15 a share, the U.S. government would have suffered a loss of 10 cents per share on its 7.7 billion-share stake in Citigroup, or about $770 million.

Treasury officials also agreed not to sell the government’s shares for at least 90 days. The 90-day lockup is a significant concession because the government previously could sell its Citigroup shares whenever it wanted.

Citigroup said Wednesday evening that it plans to go forward with repaying the financial lifelines it got under the Troubled Asset Relief Program. That includes unwinding a deal in which the government shields Citigroup from most losses on $301 billion of assets held by the company.

As Citigroup gauged interest in its huge offering, announced Monday, some investors said they were willing to buy shares only if the company extracted an agreement from the Treasury Department to hold off on any future stock sales for at least 90 days, according to people familiar with the matter.

The government now plans to unload its Citigroup stock gradually over the next 12 months, people familiar with the situation said. That is a major shift from the Treasury Department’s announcement Monday that it planned to dispose of the shares over six to 12 months.

Is this merely one of the ever increasing cracks in the economic team’s bailout plan, which as all investors are fully aware are completely unsustainable in the long run, yet sufficiently plausible over the next 90 or so days (until QE presumably ends) that one more day of buying by various algos may be warranted. Perhaps the 90 days will end up being a far too optimistic expectation.

Tomorrow at 10 am the House Oversight Committee will hold a hearing with SEC’s Robert Khuzami (oddly Mary Schapiro, together with Chris Cox, had been scheduled to appear initially, however “in a series of last minute negotiations, members settled on Khuzami”) to discuss what the SEC has already found to be a criminal transaction (and attempted to promptly bury under the rug if only if it weren’t for one Judge Jef Rakoff). Details of the hearing below:

Washington, DC – House Oversight and Government Reform Committee
Chairman Edolphus “Ed” Towns (D-NY) and Domestic Policy Subcommittee
Chairman Dennis Kucinich (D-OH) will convene a joint hearing entitled:
“Bank of America and Merrill Lynch: How Did a Private Deal Turn Into a
Federal Bailout?  Part V?”  The hearing will examine the events
surrounding Bank of America’s acquisition of Merrill Lynch and its
receipt of Federal financial assistance. 

The hearing will
take place at 10:00 a.m. on Friday, December 11, 2009 in room 2154
Rayburn House Office Building.  A webcast of the hearing will be
available on the Committee’s website: http://oversight.house.gov.

As for the actual hearing, Dow Jones presents this advance look of how Dennis Kucinich will approach the interrogation:

[Kucinich] plans to present Khuzami with a financial forecast
that had been prepared by Merrill Lynch a few weeks ahead of the December 2008
shareholder vote on the merger, according to subcommittee documents obtained
by Dow Jones.
The forecast omits projected losses from Merrill Lynch’s illiquid assets for
the month of December and underestimates by almost half the roughly $15
billion after-tax fourth quarter loss, the documents say.
Based on the subcommittee’s investigations, Kucinich says he believes Bank
of America executives were aware of the red flags raised by Merrill Lynch’s
forecast. But that didn’t stop them from presenting the document to their
lawyers at Wachtell, Lipton, Rosen & Katz.

Kucinich says Bank of America’s decision not to investigate the Merrill
Lynch document and notify shareholders of any change in expectations amounts
to “an egregious violation of securities laws.”

Referring specifically to the Merrill Lynch forecast, [BofA spokesman Lawrence] Di Rita said, “The
matter of Merrill’s projected fourth-quarter 2008 losses was considered
carefully and the decisions were made in good faith at a time of unprecedented
economic and market upheaval.”

And while committtee chairman Edolphus Towns is allegedly satisfied with BofA’s behavior in the last year, “since it paid the last of its $45 billion debt to taxpayers” even though it does not have the ready sources for this outflow, and even though the deal was merely a front to allow BofA traders to scalp exorbitant bonuses one last time before everything collapses, Judge Rakoff may not share Towns’ utter lack of interest with due process and punsihment of criminal behavior, especially where said criminal behavior has already been proven.