Merrill Committed Same Fraud As SEC Claims Goldman Did

[scandal 951]

As the knives slowly come out...

Bank: Merrill Committed Same Fraud As SEC Claims Goldman Did

By Chad Bray

Of DOW JONES NEWSWIRES

NEW YORK (Dow Jones)--Merrill Lynch & Co. engaged in the "same type of fraudulent conduct" that Goldman Sachs Group Inc. (GS) was accused of committing by the U.S. Securities & Exchange Commission in a lawsuit on Friday, a Dutch bank said Friday.

In a letter filed in New York State Supreme Court in Manhattan on Friday, lawyers for Cooperatieve Centrale Raiffeisen-Boerenleenbank BA, or Rabobank, said Merrill Lynch committed a similar fraud in the structuring of a $1.5 billion collateralized debt obligation, known as Norma CDO Ltd.

"The SEC charges bear directly on the sufficiency of Rabobank's complaint as Rabobank has alleged that Merrill Lynch engaged in precisely the same type of fraudulent conduct in the structuring and marketing of Norma through having failed to disclose that Norma's collateral pool had been selected to benefit short positions taken by" an equity investor in Norma, said Jonathan Pickhardt, a lawyer for Rabobank.

Rabobank sued Merrill Lynch in New York state court last year, alleging it was owed about $45 million in a senior secured loan when the CDO defaulted and was liquidated in 2008.

The Dutch bank claimed Merrill Lynch misrepresented that the CDO was carefully structured investment vehicle when Rabobank made a $57.7 million upfront loan in March 2007.

Rabobank claims the Norma CDO was a "dumping ground" impaired subprime assets and was structured with the help of a prized Merrill Lynch hedge fund client as a bet against the mortgage-backed securities market.

Merrill Lynch has asked for the Rabobank complaint to be dismissed, saying the risks inherent in Norma's assets were fully disclosed in the transaction documents and has failed to show Merrill committed fraud.

"The two matters are unrelated and the claims today are not only unfounded but weren't included in the Rabobank lawsuit filed nearly a year ago," said William Halldin, a Merrill Lynch spokesman.

On Friday, the SEC sued Goldman Sachs in U.S. District Court in Manhattan, claiming the investment bank committed fraud by misstating or omitting key facts about a synthetic collateralized debt obligation tied to subprime mortgages.

In part, the SEC claimed a hedge-fund firm designed the investment, but then bet against it and investors weren't told of the hedge-fund firm's role or its intentions.

Goldman denied the allegations and said it would "contest them and defend the firm and its reputation."

John Heine, a SEC spokesman, declined to comment late Friday on whether the regulator was investigating the Rabobank allegations.

Merrill Lynch is a unit of Bank of America Corp. (BAC).

[Obama 2012 1,714]

Just wait...

JP Morgan Chase

Bank of America

Wells Fargo

Add THEM ALL into these practices.

[scandal 951]

Just wait...

JP Morgan Chase

Bank of America

Wells Fargo

Add THEM ALL into these practices.

Wells Fargo isn't an investment bank, so I doubt they'll get indicted on the same kinds of charges for peddling ####### CDOs.

Merrill is now a part of BofA, so whatever suits are filed against Merrill will hit BofA.

But you're right that there is more to come. UBS, Credit Suisse, RBS, this is not just American banks.

[JohnSmith2007 353]

Wells Fargo isn't an investment bank, so I doubt they'll get indicted on the same kinds of charges for peddling ####### CDOs.

Merrill is now a part of BofA, so whatever suits are filed against Merrill will hit BofA.

But you're right that there is more to come. UBS, Credit Suisse, RBS, this is not just American banks.

I am sorry Scandal, I know that you are in the Wall Street line of business but how can we trust the big financal institutions again? I am very much anti-regulation but these guys nearly brought down the country. The really pissy part of it is they did it with the help of the Barney Frank and Criss Dodd types and they will walk scott free. These banks need a much shorter chain and the politicians that enabled them should be impeached.

[scandal 951]

I am sorry Scandal, I know that you are in the Wall Street line of business but how can we trust the big financal institutions again? I am very much anti-regulation but these guys nearly brought down the country.

Who's disagreeing? I agree the banks behaved unconscionably. They were not alone, of course. We had Fannie, Freddie, Countrywide, AIG, ... lots of guilty parties to go around. All of them were atrocious, that's precisely why I posted the article. Today it was Goldman in the headlines, but don't think Merrill and the rest weren't pulling exactly the same #######.

Also, these CDO scams weren't just the sell-side banks. They were acting in collusion with preferred buy-side institutions who are every bit as guilty. Did you read this part of the OP?

Rabobank has alleged that Merrill Lynch engaged in precisely the same type of fraudulent conduct in the structuring and marketing of Norma through having failed to disclose that Norma's collateral pool had been selected to benefit short positions taken by" an equity investor in Norma

What that means is (it's alleged) that Merrill deliberately conspired with an unnamed investor who was short on the

crappy CDOs at exactly the same time Merrill was peddling them it to long investors like Rabo. That unnamed investor isn't some innocent party. Ten to one odds it was a large hedge fund that was funneling trading business back to Merrill at preferred execution rates. The stench of this stuff goes sky high.

The really pissy part of it is they did it with the help of the Barney Frank and Criss Dodd types and they will walk scott free. These banks need a much shorter chain and the politicians that enabled them should be impeached.

See, why do you have to go and do that? You want to make it political? Fine. I'm perfectly content to discuss the chicanery of the banks as a discrete topic. But if you really insist on bringing Congress into it, I can go there too.

Sure, Congress played a role. It has oversight responsibility. Which Congressional leaders are most responsible? You say Frank and Dodd. I totally disagree. I would label the primary war-criminals as Phil Gramm (Republican of Texas), Jim Leach (R-Iowa) and Thomas J. Bliley, Jr. (R-Virginia), the architects of the 1999 Gramm–Leach–Bliley Act which repealed the Depression era Glass-Steagall Act. That's what really opened the floodgates for the bank excesses we were just talking about above. Three Republicans, who clamored for reduced regulation and breaking down of bank barriers. Hmmm. Big surprise things came crashing down just one decade later? I think not.

[Obama 2012 1,714]

My only hope is, is that they actually legislate and regulate the living hell out of Freddie and Fannie too. They have done enough damage themselves and caused a lot of issues as well.

The WHOLE thing needs to be regulated properly. Not just the ones who aren't 'friends'