Wall Street had something to cheer
about Wednesday, other than JP Morgan Chase’s reported record $3.6 Billion
profit. After flirting with the
prized, five-figure psychological threshold a bit, the Dow finally crossed
10,000 once again, closing at 10,015.86, up 144.8 points or 1.5 percent gain,
closing above 10,000 for the first time in a bit shy of a year and a fortnight
– since Oct. 3, 2008.
Are we rich beyond dreams of
avarice again? Hardly. Will the well scrubbed, unemployment
figure now cross 10% nationally – juxtaposing two entirely different worlds
(the second of which is not celebrating today)? Likely, say our brightest economic minds.
President Obama gave a speech at a
construction site joining two highways that ran out of money to complete their
construction decades ago, fresh from his dubious Nobel Laureate-hood, touting
how well we have done in this recovery since the dark days of last Winter. Some $60 million of recovery funds gave
jobs to hard-hatted construction workers smiling behind the President while he
spoke.
Our 401k’s have clawed their way
back from being 101k’s and 201k’s to now maybe being 301k’s, still way off the
Dow’s 14,000-plus high in the heyday of easy money and NINJA loans just a few
years ago. And those record
corporate profits for the financial industry? It is an accounting trick, in my humble opinion, only
achieved by ignoring the stinky, bad loans still on their books (and hoping
everyone else will do the same), and feeding at the taxpayers’ money trough,
using nearly free Treasury money to lend out at all kinds of very profitable
rates right now.
Bank of America faces big problems
over those giant Merrill bonuses that were not disclosed to the shareholders
[allegedly]. The news this week
titillated the legal world recounting a change in Bank of America’s legal
representation and a Board decision to waive their attorney-client
privilege. This rare move may soon
reveal the inner workings of how this could happen. The disclosure, or lack of disclosure, case is now headed
for trial next year and a major NYC law firm will soon be under the hot lamps
with no attorney-client privilege to protect its advice given to B of A
executives.
According to American Lawyer
Magazine, [http://amlawdaily.typepad.com/amlawdaily/2009/10/report-bofa-to-waive-privilege-in-merrill-flap.html],
B of A’s former attorneys, the famed (and feared) Wachtell firm, have come
under "intense scrutiny" for advice given to B of A’s Board. This lawyer-to-client advice is usually
protected from disclosure by the absolute and time-honored cloak of legal
confidentiality, known as the "attorney-client privilege." This legal advice from former counsel,
it is contended, apparently resulted in listing the planned $5.8 Billion
planned Merrill bonus pool only in a
secret schedule, which shareholders could not access before they voted to
approve the merger (or ‘shotgun marriage,’ if you prefer) of B of A with
Merrill back in the dark and panicky days of Fall 2008.
Waiving the attorney-client
privilege here is the biggest of ‘big deals’ and may allow us all to see
something that we don’t get to see very often – unless we sit in major Board
rooms, or provide legal representation in the same context. All kinds of things can come crawling
out from under that rock.
This may be a harbinger of legal
things to come while Wall St. celebrates its apparent return to happier days
and the JP Morgan Chase shareholders celebrate their record $3.6 Billion profit
just announced. For, under the tip
of this iceberg is one enormous amount of litigation just getting under way,
all seeking to re-examine what exactly happened back in Fall 2008, when we were
all told that we were peering over the cliff into the first Great Depression of
the 21st Century. That
situation led to a lot of unprecedented things happening in very short order –
the B of A/Merrill bonus non-disclosure problem was only revealed after
Manhattan federal district court Judge Jed Rakoff recently rejected a token $33
million settlement between B of A and the SEC over failures to disclose to
their stockholders the gigantic $5.8 Billion paid in Merrill bonuses, before
those stockholders approved the merger without benefit of this vital
knowledge. Judge Rakoff’s
opinion minced no words, stating strongly that the rest of that iceberg needs
to be revealed in a full trial next year.
That one will be well worth following.
I assure you that there are other
legal bombshells coming down the pike just like this one. Some, perhaps even more egregious. For example, we sit now a year later and
still nobody can or will account for where went the ¾’s of a Trillion dollars
of your taxpayer dollars and mine, handed over, with virtually no strings
attached, to the financial industry last Fall, only to disappear, seemingly
without a trace. Yes, that same
financial industry now celebrating Dow 10,000, JP Morgan Chase’s record
profits, and currently lobbying like mad to prevent any real, systemic changes
which could prevent another financial debacle awaiting us in the future due to
insane risk-taking and the continuing ability to trade privately in unregulated
financial instruments that few can truly understand.