The Securities and Exchange Commission showed leniency toward Bank of America in penalizing the firm for securities law violations last year because the financially weakened bank was on taxpayer-backed life support, according to a new watchdog report.
The agency agreed to a settlement that was “favorable” to the bank “because of the nation’s perilous economic situation at the time” and the fact that it had received billions of dollars in taxpayer aid, according to the report by the SEC’s inspector general. Specifically, during settlement negotiations, Bank of America won relief from sanctions that could have hurt its investment banking business.
The inspector general, H. David Kotz, did not find fault with the decision but suggested that the SEC spell out its procedures for handling such cases more clearly. Agency spokesman John Nester said, “We value the report’s insights and look forward to addressing its recommendations.”
Here’s the problem with getting up in arms over this: Once you’ve committed to the government swooping in and saving people’s asses (or company asses, in this case) you have to be willing to accept that there’s a balance between what’s right and what makes sense.
In this case, BOA got a nice chunk of change from the Fed. What would the point have been if after giving them all this money BOA had to pay fines with the money they were just given? I know that sounds like a stupid dilemma, but in reality, that’s just what happened.
If you’re going to commit to bailouts and go through with them, you can’t start acting punitively toward the folks you’re giving the bailouts to, lest they just end up paying you back with your own money.
That doesn’t make a whole lot of sense either, does it?
Personally, I would’ve rather seen BOA not get bailed out and get slapped silly for any SEC violations they had made, but I know that’s just my crazy “you’re responsible for your shit” attitude talking.