Bank of America defends Merrill bonuses

Bank of America Corp mounted an aggressive defense of Merrill Lynch & Co's decision to award some $3.6 billion of bonuses last year, as it tries to convince a federal judge to approve a settlement with the US Securities and Exchange Commission over its disclosures.

In a Monday filing with Manhattan federal court, the largest US bank said it was "widely understood" from Merrill's public disclosures and media reports that Merrill would award billions of dollars of year-end bonuses, despite a full-year loss that would reach $27.6 billion. Bank of America also said it made "no false or misleading statement or omission" in its proxy statement distributed to shareholders who voted on the bank's acquisition of Merrill, which closed on Jan 1.

"The intention of Merrill Lynch & Co Inc to pay incentive compensation for 2008 was disclosed and was part of the 'total mix' of information available to shareholders," the bank said. Bank of America had agreed on Aug 3 to pay $33 million to resolve an SEC civil lawsuit saying the Charlotte, North Carolina-based bank misled shareholders by not disclosing it had authorized up to $5.8 billion of bonuses at Merrill.

US District Judge Jed Rakoff, however, rejected the settlement, demanding many more details about who knew what and when about the bonuses, including the decision not to reveal the payouts before the merger closed. The bonuses have been the focus of Congressional hearings and a probe by New York Attorney General Andrew Cuomo.

At a hearing on Aug. 10, Rakoff said the $33 million settlement seemed to be "lacking in transparency" and "strangely askew," and might not prove "remotely reasonable" if the SEC were right that the bank lied about the bonuses. Rakoff said he could not reconcile the SEC's position that Bank of America "effectively lied" to shareholders with its decision not to force the bank to admit wrongdoing.

Noting that the government pumped $45 billion into Bank of America from the federal bank bailout plan, Rakoff said that "one might infer that public money was used, in effect, to pay the bonuses." The SEC is expected on Monday to file its own papers regarding the settlement. It is unclear whether Rakoff will approve the settlement or seek to modify it.

Bank of America shares were up 4 cents at $17.50 in afternoon trading on the New York Stock Exchange. The case is SEC v Bank of America Corp, US District Court, Southern District of New York (Manhattan), No 09-6829.
economictimes.indiatimes.com

Recession in Britain 'at an end'

Confidence among business professionals has surged, suggesting the recession is at an end, a survey has said.

The Institute of Chartered Accountants' index of business confidence rose to 4.8 at the end of June, from -28.2 in March, the biggest rise for two years.

However, chief executive Michael Izza warned against "underestimating" the challenges ahead for businesses.

The institute predicts the UK economy will grow by 0.5% in the third quarter of 2009.

Its forecast comes after the economy shrank by 0.8% in the second quarter of the year.

More than 1,000 chartered accountants were surveyed across England, Wales and Scotland.

Investor confidence about the UK economy also appears to be growing, with the UK's main FTSE 100 share index ending Monday trading at a 10-month high of 4,896, up 0.9% on the day.

More optimism

"This quarter's Business Confidence Monitor suggests that the UK recession is at an end," said Mr Izza.

Many are now more optimistic that the global recession is ending.

Japan, France and Germany have all recently emerged from recession in the second quarter between April and June, as have Asian economies like Thailand and Hong Kong.

US Federal Reserve chairman Ben Bernanke has also said that the US, the world's largest economy, is approaching recovery.

While initial figures showed that neither the US or UK grew in the second quarter, many expect economic output to return to positive territory in the three months to September.

"The considerable stimulus from the easing of monetary and fiscal policy and the past depreciation of sterling should lead to a recovery in economic activity," the Bank of England said earlier this month.

'Challenge'

The confidence survey said that 41% of senior professionals were more confident about their business prospects in the next year, but only 6% were much more confident, indicating that some caution remains.

The banking sector saw a big rise in confidence

"While there is no doubt that the UK economy is on its way to recovery, we shouldn't underestimate the challenges ahead for businesses," said Mr Izza.

IT was the most optimistic sector, followed by banking, finance and insurance. The institute said the banking sector in particular had shown "a remarkable upturn given the turmoil of the last two years".

The least confident professions were health and education, as fears of cuts in the public sector grow.

Reservations

Policymakers have been wary of stoking expectations that the UK's economic woes are over.

"The pace of recovery over the next few years is highly uncertain," said Bank Governor Mervyn King.

The Bank surprised the financial markets by injecting £50bn of new money into the economy earlier this month, more than the £25bn that had been expected.

The move, which took the total to £175bn, is viewed as a sign of how divided the Bank committee members that set interests rates are over the recovery in the UK economy.

In addition, the number of jobless in the UK is now at its highest level since 1995, with 2.4 million people out of work.

news.bbc.co.uk

Calls to reopen CIA abuse cases

The US justice department is calling for some dozen prisoner abuse cases to be reopened, the New York Times says.

The recommendation could lead to the prosecution of CIA employees and contractors over the treatment of terrorism suspects, the newspaper says.

The call comes as justice officials are set to disclose previously censored parts of a report into detainee abuse.

These show how electric drills and mock executions were used by CIA agents to elicit information, US media say.

A heavily censored version of the 2004 internal Central Intelligence Agency (CIA) report was released last year but in an almost meaningless form because so much remained classified, the BBC's Daniel Sandford reports from Washington.

A federal judge ordered more details to be released on Monday, after a legal challenge by the American Civil Liberties Union (Aclu).
According to US media, the report by the CIA's inspector general details how a gun and an electric drill were brought into an interrogation session of suspected USS Cole bomber and alleged al-Qaeda commander Rahim al-Nashiri in a bid to frighten him.

In another case, a gun was fired in another room to lead a detainee to think another suspect had been killed.

The US has banned harsh interrogation methods, including death threats.

Even under the Bush administration's controversial interpretation of the law, causing "severe mental pain" by the "threat of imminent death" was considered illegal.

Criminal inquiry

The call for the reopening of the prisoner abuse cases - mainly in Iraq and Afghanistan - was made by the US department of justice's ethics office, the New York Times reported.

The cases account for about half of those that were referred to the justice department by the CIA's inspector general but which were later closed.

A CIA spokesman told the New York Times that the advice to reopen closed cases had not been sent to the agency.

"Decisions on whether or not to pursue action in court were made after careful consideration by career prosecutors at the justice department. The CIA itself brought these matters - facts and allegations alike - to the department's attention," said the spokesman, Paul Gimigliano.

The recommendations to review some cases, which would reverse Bush administration policy, have been sent to US Attorney General Eric Holder.

He is set to announce soon whether he will appoint a prosecutor to investigate alleged abuse by CIA agents.

It is expected that he will go ahead with a new criminal inquiry.

Such a decision would pose problems for the CIA. It would also have political ramifications given President Barack Obama's desire to leave questions over the Bush administration's interrogation practices in the past, correspondents say.

In another development, Mr Obama has approved the creation of a new unit to question key terrorism suspects, the Washington Post reported.

The unit, called the High-Value Detainee Interrogation Group, is to be composed of experts from several intelligence and law enforcement agencies.

It will be housed at the FBI but will be overseen by the national Security Council, giving the White House direct oversight, the paper reports.

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Oil price touches high for 2009

The price of oil has hit its highest level of the year, boosted by sharp rises in Chinese stocks and rising shares on Wall Street.

The price of US crude rose to $74.15 a barrel before settling at $73.89, a gain of 98 cents. London Brent was up 86 cents at $74.19.

The oil price hit $147 a barrel last July and fell below $74 last October, a level it has not breached since.

Worldwide oil prices have been extremely volatile this year.

Prices have been affected as much by sentiment as by fundamentals of demand and supply.

Ben Bernanke, the chairman of the Federal Reserve, said that prospects for a return to growth in the near term appeared good in the US and abroad.

US shares traded higher - with the Dow Jones index rising 1.7% to 9,506 - after Mr Bernanke's speech and on better-than-expected figures for sales of existing homes.

Sales rose by 7.2% in July to an annual rate of 5.24 million homes.

"The significant rise in the oil price in the first half of the year is due in large part to a recovery in investment by financial investors," said Eugen Weinberg at Commerzbank.

news.bbc.co.uk