From a Bloomberg article that will undoubtedly get more coverage.

The SEC is attempting to settle with BoA again:

The $150 million SEC settlement still has to be approved by U.S. District Court Judge Jed Rakoff. Last year, Rakoff called the SEC’s initial settlement, which focused on the bank’s bonus disclosures, neither fair nor reasonable and questioned why the bank’s executives and lawyers weren’t sued.

NY AG Cuomo, on the other hand, is just getting started:

“We believe the bank management understated the Merrill Lynch losses to shareholders, then they overstated their ability to terminate their agreement to secure $20 billion of TARP money, and that is just a fraud,” Cuomo said yesterday during a telephone press conference. “Bank of America and its officials defrauded the government and the taxpayers at a very difficult time.”

There are also a string of emails that add to the evidence Cuomo is pursuing. In Yves’ naked capitalism post about this:

First, there was virtually no due diligence. This is inevitable in a rushed deal, but that sort of haste has consequences.

Second, not only did Merrill keep BofA’s CFO Joe Price apprised of the losses, but both the general counsel, Timothy Mayopoulos and the firm’s outside counsel, Wachtell Lipton, said they needed to be disclosed. So what happened?

Translation: Merrill was obviously going to fail.

The entire financial system was quickly finally shutting down after Lehman’s close & the Treasury/Fed felt, probably very intelligently, that if Merrill “failed” the ensuing chaos could not be stopped. So they forced BoA to “buy” Merrill. Impossible to do any due diligence within hours on such a huge, complicated and completely screwed company.

I personally believe the CEO & CFO knew Merrill was screwed so they either 1. did not want to show the emperor had not only no clothes, but the entire country didn’t either and 2. they thought they could bury Merrill’s loses, ie: play with their books for a few quarters, so they personally wouldn’t get fired once the numbers were public.

Small history lesson – you probably never heard of Lehman Brothers, and their bankruptcy forced AIG to be bailed out, TARP, etc.

Now imagine Merrill Lynch, which had a balance sheet over $1T at the time – and them going belly up. Crashing in “the wrong way” people wouldn’t get their retirement checks from the accounts they had with Merrill for “x” number of week/months as it was sorted out – or – us bailing them out as well. AIG would have been tiny compared to that.

The risk for this to happen again is still present and very real. Aren’t you curious about how and why?

Update about how messy this is going to be.

From The Daily Beast:

White’s first order of business is to get the civil case dismissed, according to several sources. But if she’s unsuccessful, she plans a vigorous defense, including calling high-level government officials to testify. “If this thing goes to trial you can expect both Paulson and Bernanke to be on the witness list,” said one person close to the defense team, “and right now Lewis doesn’t want to settle.”

Duh.

Hat tip to Zero Hedge for Daily Beast link.