By Eric Zimmermann - 08/06/09 10:18 AM EDT
A federal judge on Thursday refused to approve a settlement resolving a civil lawsuit brought by the Securities and Exchange Commission (SEC) against Bank of America.
Bank of America had offered $33 million to settle claims that it misled investors about key details of its merger with Merrill Lynch late last year.
Federal Judge Jed Rakoff said the parties had not explained why $33 million was appropriate, or whether those funds might have actually come from federal bailout dollars.
“The proposed consent judgment in no way specifies the basis for the $33 million figure or whether any of this money is derived directly or indirectly from the $20 billion in public funds previously advanced to Bank of America as part of its 'bailout,'" Rakoff wrote in his judgment.
Rakoff added that the agreement did not get to the bottom of the “very serious allegations” the SEC had made against Bank of America.
Rakoff has scheduled a hearing on Monday to discuss the proposed settlement.
Investors and lawmakers have questioned whether executives at Bank of America pressed forward with the merger despite learning of Merrill’s increasingly large losses.
Lawmakers have accused former Treasury Secretary Hank Paulson and Federal Reserve Chairman Ben Bernanke of unduly pressuring Bank of America CEO Ken Lewis to move forward with the merger despite growing concern about Merrill’s fiscal health.