President Barack Obama won the election because he clearly articulated a more inclusive, smarter and more accountable vision of how government should function. People were tired of politicians who treated government as the enemy. They wanted somebody who could get it to work.
Nobody expected miracles overnight. But we expected steady progress and straight talk; action, not just lofty rhetoric.
Once in office, however, the Obama Administration’s timid actions too often echo the previous administration – especially in its handling of the financial crisis.
Most of the important work takes place out of public view, resulting in mystifying agreements between the government and powerful private interests, with taxpayers footing the bill and the private interests walking away with a sweet deal.
Most recent case in point: President Obama’s Securities and Exchange Commission settled for $33 million with Bank of America after charging that the bank’s board misled their shareholders during the $50 billion acquisition of troubled Merrill-Lynch; telling the shareholders while the merger was pending they would pay no bonuses to Merrill’s executives, then after the merger was complete conceding they had already agreed to a whopping $3.6 billion in bonuses.
For The SEC treated the settlement as a routine matter: like all SEC settlements, the agency made no accusations of wrong-doing and Bank of America and it made no admission.
The SEC treated the whole issue like it was a matter of straightening out a paperwork mix-up in a proxy statement.
No wonder Bank of America leapt at the deal: $33 million was a bargain, given that the bonuses had they been disclosed would have likely soured shareholders on the merger – not to mention the alarms that would set off with wary taxpayers.
Remember the AIG bonuses?
Luckily there was a responsible public official in the neighborhood with more common sense and propriety. That would be U.S. District Court Judge Jed Rakoff in New York, who had the authority to accept or reject the settlement.
“I would be less than candid if I didn’t express my continued misgivings about this settlement at this stage,” Rakoff said at a hearing. “When this settlement first came to me, it seemed to be lacking, for lack of a better word, transparency.”
Rakoff hit hard on the paltry amount of the settlement compared to the size of the bonuses and the stakes for Bank of America, referring to it as “strangely askew.”
Probing the allegations, Rakoff described the SEC’s filing as “a fairly uninformative, bare bones complaint,” according to Associated Press. He asked SEC officials who exactly approved the year-end bonuses.
“Was this some sort of ghost that performed these actions?” Rakoff asked David Rosenfeld, the associate regional director in the SEC’s New York office. “Or were there human beings who wrote these documents?”
The judge spoke for millions of Americans – but apparently not the SEC – when he asked: “Do Wall Street people expect to be paid large bonuses in years when their company lost $27 billion?”
Rakoff kept the SEC on the hot seat for 90 minutes. As for Bank of America, it had “effectively lied” to its shareholders, the judge said. He delayed his approval pending getting more answers.
Shame on Obama’s SEC for agreeing to the settlement in the first place. He wasn’t elected president so his administration would go easy on bank officials when they’re caught lying to their shareholders over how they plan to spend billions of dollars.
With his savvy, well-run campaign and pledge for change, the president set the bar high for himself: he not only assured us that he was the best person to deal with this financial crisis and others but that he would do so by changing the way business is done in Washington.
The Obama Administration’s mishandling of the Bank of America settlement suggests that the SEC enforcers needs to spend less time locked away with B of A’s lawyers and more time listening to some of their boss’s campaign speeches promising tougher enforcement and a new culture in the corridors of power. It’s not just our precious tax dollars and the rights of shareholders to be told the truth that’s at stake. It’s the administration’s own credibility.