The Smartest Guy in the Room

[BridgeTheGap]

If New York was mother to many of the evildoers in the financial disaster that sent the economy into a tailspin, it's also home to an avenging angel for the millions of ordinary Americans who lost billions of dollars in the meltdown.

The guy with the wings and the sword also wears robes: He's federal Judge Jed Rakoff. The shock waves from Rakoff's scathing denunciation last month of a proposed settlement between the Securities and Exchange Commission and the Bank of America are still rippling through Wall Street and Washington.

Bank of America CEO Ken Lewis is on his way out, and New York Attorney General Andrew Cuomo is pressing an investigation into the deal in which the bank purchased ailing Merrill Lynch last December without telling its shareholders that executives of the tottering brokerage were paid $3.6 billion in bonuses shortly before the takeover was announced. A congressional panel is also probing the deal.

The common-sense wisdom of Rakoff's ruling resonated with a public infuriated with billion-dollar bonuses and bailouts. The SEC signed off on an agreement in which the bank agreed to pay $33 million (in shareholder money) for concealing the bonus payments from the shareholders. In effect, the victims were being punished, a topsy-turvy outcome fairly typical of the SEC's handling of wrongdoing by large corporations in cases like these.

"Oscar Wilde once famously said that a cynic is someone 'who knows the price of everything and the value of nothing,'" Rakoff wrote.



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