Bank of America faces more bonus embarrassment

NEW YORK (Reuters) - Bank of America Corp will likely face more embarrassing disclosures about bonuses paid at Merrill Lynch & Co after a federal judge refused to rubber-stamp a settlement over the $3.6 billion of payouts.

Judge Jed Rakoff's criticism of the $33 million settlement with the U.S. Securities and Exchange Commission prolongs the drama over bonuses that have prompted outrage in Congress and a probe by New York Attorney General Andrew Cuomo.

It also means Kenneth Lewis, Bank of America's embattled chief executive, may face more scrutiny over perhaps the most controversial aspect of the shotgun merger.

"What the judge is trying to get at is, was there actual fraud here?" said Cornelius Hurley, director of the Morin Center for Banking and Financial Law at Boston University. "The risks are they go back to their corners, and the SEC really does attempt to prove wrongdoing."

At a hearing in Manhattan, Rakoff said the fine appeared "strangely askew," representing only a "tiny, tiny fraction" of the bonuses, and might be unreasonable if the SEC were correct that the bank "essentially lied" about the bonuses.

Despite losing $27.61 billion in 2008, Merrill paid out 696 bonuses of $1 million or more, Cuomo said in a report in July.

GIVING UP THE GHOST

Rakoff questioned whether taxpayers footed the bill for the bonuses with some of Bank of America's $45 billion of bailout money, and whether it was fair for Merrill to pay bonuses, other than those required by contract, averaging $91,000 per person.

He also appeared dismayed by arguments that lawyers for Bank of America and Merrill somehow kept upper management out of the loop on many details of the bonuses.

"Was this some sort of ghost who performed these actions, or were they human beings?" Rakoff asked SEC lawyer David Rosenfeld at the hearing. Rosenfeld said the regulator chose in agreeing to settle not to allege wrongdoing by individuals.

Greater disclosure of who knew what could add ammunition to lawsuits against Bank of America as well as critics of Lewis.

Shares of Bank of America have fallen by roughly half since the announcement of the Merrill purchase after less than 48 hours of talks last September 15, at the height of the financial crisis.

Much of the anger concerns when Bank of America knew Merrill's fourth-quarter losses were soaring, why it did not disclose them sooner, and why it did not back out of the merger. Lewis has said regulators pressed him to complete the merger.

More disclosure might also shed light on the SEC's actions, at a time the Obama administration is mulling historic changes to federal oversight of financial companies.

JUDGE HAS LIMITED POWERS

"BofA is already being forced to make radical changes in how it operates, but I see less of a risk to BofA than I do potentially to government officials," said Jill Fisch, a professor at the University of Pennsylvania Law School and co-director of its Institute for Law and Economics.

"One of the things the settlement covers up is the government role, including that of the Federal Reserve," she added. "More disclosure of what went on could provide a check on overreaching by any one regulator."

Fisch said Rakoff cannot force the SEC to impose a higher penalty, but has the authority to insist on greater disclosure because of the public interest.

Richard Bove, an analyst at Rochdale Securities who views the merger as a positive for Bank of America, said prolonging the legal battle actually hurts shareholders.

"It is the stockholders who pay the fines," he wrote.

Rakoff ordered Bank of America and the SEC to submit new papers by August 24, and said he might hold another hearing.

"The judge seems to have the feeling the SEC pulled a punch, and that's why he wants to get down to the facts of who knew what, and when," Hurley said. "This comes as the SEC tries to recover some of its damaged reputation in the enforcement area. They're not getting a gold star for this one."

The case is SEC v. Bank of America Corp, U.S. District Court, Southern District of New York (Manhattan), No. 09-6829.

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On the radio program Monday, Glenn Beck, Stu Burguiere, and Pat Gray discussed the Trump defense team's arguments in the Senate impeachment trial against President Donald Trump.

"This is different than what the Democrats were doing," Glenn said of the Trump team's impeachment defense. "We know the case of the Democrats, they just kept going over and over and over, for three days, the same stuff. The Republicans, at least on Saturday, did not ... and I thought it was really, really good."

Glenn added, "The president's defense was very compelling."

Watch the videos below to hear Glenn's top takeaways from the president's defense team:

Part 1: Why the president's defense is 'very compelling'

Part 2: Top takeaways from president's impeachment defense

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Americans are getting crushed by healthcare costs. In 2018 alone, we spent $3.6 trillion on healthcare — that's more than $11,000 per American and nearly a fifth of the national Gross Domestic Product (GDP). It's on everyone's minds, which is why it has taken center stage in the Democratic party's primary. Of course, the solutions offered by the current crop of presidential candidates would do nothing to help alleviate that enormous spending. In fact, it would only add to it — what with Bernie Sanders' Medicare for All and Joe Biden's proposed ObamaCare expansion.

However, what also deserves attention in discussions about plans that increase the government's role in health care is how religious organizations would be affected. Faith-based hospitals and health care sharing ministries (HCSMs) play an important role in America, often serving as a critical provider and/or facilitator of payments for medical services in many states. If plans like Medicare for All were implemented, these groups would be at risk of going bankrupt or being severely curtailed due to the elimination of choice that comes with these proposals.

Instead of imposing a top-down and expensive health care system overhaul, faith-based providers and groups should be allowed to continue offering a variety of plans that work as high-quality, often cheaper alternatives. And more Americans should consider them.

Instead of imposing a top-down and expensive health care system overhaul, faith-based providers and groups should be allowed to continue offering a variety of plans that work as high-quality, often cheaper alternatives.

As mentioned, one such option is a health care sharing ministry. In this model, individuals contribute money into a pool managed by a religiously or ethically-affiliated organization, and costs for medical treatment are shared by people who adhere to that organization's belief system. Typically, applicants are required to sign a statement of faith in order to be accepted. It's basically like a subscription service: consumers pay a set amount of money into the ministry every month. Then, when they have a medical need or incident, they submit a claim to the ministry. Members whose claims are approved are reimbursed by the ministry from that pool of funds. Note, these ministries don't cover procedures they deem immoral.

Because providers are often getting paid in cash under this model — and typically within 90 days — patients are able to negotiate significant discounts, in some cases slicing procedures' costs to a fraction of the initial price. Insurance companies, by comparison, tend to not pay dollar for dollar on claims, and certainly not in cash. Additionally, insurance companies usually have onerous paperwork requirements, forcing doctors to spend half of their time on electronic health records and desk work. This increase in demand for administrative work is partly responsible for the United States leading the world in administrative costs in healthcare.

There are various types of HCSMs, each offering different benefits depending on what the individual needs — and a lot of savings on monthly plans. Take Christian Healthcare Ministries, for example. It's resulted in enormous savings for its members. Whereas the average healthcare plan can cost about $400 a month on the low end (with high deductibles), CHM plans can run between $78-172 a month for a single person. These kinds of plans are particularly great options for people who are relatively healthy and young, where the need for doctors and prescription drugs is less likely.

HCSMs have seen explosive growth in popularity recently. In 2014, there were only approximately 160,000 members. By 2018, membership ballooned to about 1 million HCSM members around the United States who have shared over $1 billion in medical expenses. But unfortunately, many people still feel locked into the traditional — and expensive — health care insurance model. HCSMs provide a way out, and, depending on their belief system, people should research them and see if there's one that best suit their needs. If more people deviate away from the traditional health care insurance market, insurance companies would be incentivized to adjust their pricing. That won't be possible, of course, if plans like Medicare for All are implemented.

Health care is one of life's biggest expenses, and voters are understandably desperate for a plan that cuts costs without compromising quality of care or access to it. Alternative options to health care insurance such as HCSMs are practical, free-market solutions that saves money. Americans should sift through these options before subscribing to plans that will only break the bank.

James Czerniawski is a Young Voices contributor. Follow him on Twitter @JamesCz19.

Bill O'Reilly: Adam Schiff is in 'wonderland' during the Senate impeachment trial

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On the "Glenn Beck Radio Program" Friday, Bill O'Reilly gave his latest take on the Senate impeachment trial of President Donald Trump, and explained why he thinks House Intelligence Committee Chairman Adam Schiff (D-Calif.) is like "Alice in Wonderland."

Watch the video below to catch more of the conversation:

youtu.be


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Sen. Ted Cruz (R-Texas) joined Glenn Beck on the radio program Friday to discuss the latest developments in the Senate impeachment trial of President Donald Trump.

According to Cruz, Thursday was a "very consequential day" in the otherwise tedious and redundant impeachment proceedings.

"Yesterday, the House managers effectively threw Joe Biden under the bus," Cruz said. "They doubled down on what they started doing on the first day of arguments, which was making their entire case ... based on the proposition that there was zero evidence to justify investigating Burisma [the Ukrainian natural gas company that paid then-Vice President Joe Biden's son, Hunter, $50,000 a month to sit on the board]."

Cruz went on to explain that every time the Democrats, namely House Intelligence Committee Chairman Adam Schiff (D-Calif.), rehash the "zero-evidence" argument, they open the door for Republicans to present the overwhelming evidence that contradicts those claims.

"That proposition, that there's zero evidence to investigate Burisma, is utterly and completely absurd. So, I'm looking forward to Saturday when the president's lawyers will begin presenting his case. Because what the Democrats have done, is they have opened the door to this. And I hope the president's lawyers will stand up and systematically lay out the case," Cruz said.

"They've been arguing that Hunter Biden is completely irrelevant to this case. Well, the House managers have now, through their arguments, made Hunter Biden not only relevant — he was always relevant — but critical now," he continued. "They built the entire case, like a house of cards, on the proposition that there was no reasonable basis to investigate Burisma. And that's just absurd."

The two also discussed Cruz's new podcast, "Verdict with Ted Cruz," which he records with Daily Wire host Michael Knowles each night following the Senate trial.

"Last night's podcast went through systematically ... all of the overwhelming evidence of corruption from Burisma that any president, not only had the authority to investigate, but the responsibility to investigate," Cruz said. "And that, ultimately, is why President Trump is going to be acquitted at the end of this process."

Watch the video below for more details:

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