Didn’t Bernanke also recently lean on BoA CEO Ken Lewis to commit securities fraud by not declaring losses at Merrill Lynch prior to its takeover by BoA? We appreciate that Gentle Ben is just doing his job and all. But does he really think we’re going to trust him following the Merrill-BoA episode?

We don’t believe a word Bernanke says about the economy… or about banks. As NYU economics professor Nouriel Roubini put it recently, the stress tests (or “fudge tests” as he calls them) aren’t worth the paper they’re written on. They’re meaningless, because they have been reverse engineered to create positive results. Here’s Roubini on the subject:

If you look at the actual data today macro data for Q1 on the three variables used in the stress tests – growth rate, unemployment rate, and home price depreciation – are already worse than those in U.S. government baseline scenario for 2009 AND even worse than those for the more adverse stressed scenario for 2009. Thus, the stress test results are meaningless as actual data are already running worse than the worst case scenario.

Nassim Nicholas Taleb, a scholar of risk and chance at Polytechnic Institute of New York University, author of The Black Swan:

The Impact of the Highly Improbable: “This stress test is the equivalent of testing the Brooklyn Bridge by running a single heavy truck on it.”

We have this crazy, old-fashioned idea that shareholders actually own public corporations – not management teams and certainly not the government. We believe the owners of a business have the right to decide whether or not to go forward with important changes to the capital structure – like mergers and acquisitions. It is, after all, their property. So when Bank of America’s management team decided to buy Merrill Lynch despite Merrill’s enormous $15 billion fourth-quarter loss and its decision to accelerate billions worth of employee bonuses, we think Bank of America’s rightful owners should have been appraised of these significant developments before shareholder vote.

You probably heard what happened instead: The government leaned on Ken Lewis to keep quiet about Merrill’s losses. And he caved. Then in a move of utter cowardice, Ken Lewis tried to blame the affair on Merrill’s former CEO. We hope shareholders sue the government for tortuous interference with the contract. They’ll win. We hope Ken Lewis goes to jail for securities law violations – for which he is clearly guilty. We hope Bank of America’s rightful owners will one day have their property returned to them. So I guess you could say we’re on the side of property owners and against the endless number of leeches who try to con, steal, and muscle in on them.

The suit states that Cuban dumped his 6.3 percent stake in the company after getting word that the company planned a private offering the next day, which would dilute the value of existing shares.

Of course, Cuban disagrees with the lawsuit, saying “I am disappointed that the Commission chose to bring this case based upon its Enforcement staff’s win-at-any-cost ambitions. The staff’s process was result-oriented, facts be damned. The government’s claims are false and they will be proven to be so.”

The real irony here is that in 2006, Cuban started the website sharesleuth.com that is “aimed at exposing securities fraud and corporate chicanery”. Oops.

Without knowing the real facts of the case, I won’t pass judgment one way or the other. But one has to wonder, for a guy who is a billionaire, and has paid over $1 million in fines to the NBA (Cuban owns the Dallas Mavericks and sits courtside at almost every game) for voicing his opinion on the quality of the referees, is it really worth getting tangled up with the SEC over $750,000?

This likely won’t affect Cuban’s chance of purchasing the venerable Chicago Cubs franchise, as word is that he has no chance of getting approved, even though he was the highest bidder. He has simply ruffled too many feathers amongst NBA owners, and the Major League Baseball owners don’t want to deal with him either. That’s too bad, because Cuban has injected energy into the NBA and he could go a long way towards bringing excitement back to baseball.

Check out Cuban’s blog to get a bit more insight into his thoughts. It’s a nice mix of sports and business, and contains some good information.

Source: Another High Profile Case of Insider Trading

“Who benefits?” as the criminal lawyer demands of the jury. And curiously enough, at first glance at least, the lawyers look set to clean up once more.

“Investors and their lawyers filed 70 securities-fraud class actions in the first quarter,” reports Conde Nast’s Portfolio.com, “almost the same number that were filed in the first half of 2007, according to NERA Economic Consulting, which tracks the filing of these complaints.”

Twenty-six of the 70 new cases in 2008 to date are linked to the sub-prime disaster, with Bear Stearns cited alongside J.P.Morgan, Lehman Brothers, T.D.Ameritrade Morgan Stanley and 14 other firms.

“The increase in filings continues a trend that began in the second half of last year,” says Portfolio.com, quoting NERA. “That spike pushed class-action filings up 58% in 2007, compared with the year earlier. Plaintiffs filed 207 cases last year, versus 131 in 2006.”

Thus we’re left yet again here at BullionVault wishing that legal firms were listed stocks, rather than private partnerships! Outside the courts, is there anyone climbing ahead on this mess of defaults, missed margin calls, foreclosures and lost jobs?

Investment bank staff are already pretending they’ve had a round-the-world trip planned for this summer since, oh, since they realized investment banking wasn’t for them anyway. Latest estimates in the City of London put the losses between 6,500 and 30,000 by autumn next year – almost twice the kill-rate of the Tech Stock Crash.

Over in the plush hedge-fund suites a mile or two west in Mayfair, Plexus Partners lost one-third of its value since January after screwing up its arbitrage trades. Another crazy-named hedge fund – Polygon – has tried to stop its investors withdrawing their cash to defend its future. And sticking to English, rather than Latin, failed to save Russell Investments in New York from closing two of its three hedge funds this week. They dumped two-thirds of their value inside six months.

Only global-macro hedge funds showed any real gains so far this year, according to Hedge Fund Review, returning an average of 11.5% in the first 10 weeks. But given they’ve had to wait six years for a decent surge (at last!) in asset-price volatility to start attracting new business, it hardly seems worth the bother.

Sitting tight at the other end of that see-saw called risk, meantime, cash savers made a little on interest rates thanks to the “dash for cash” by banks across the world, but they gave it all back to inflation and sleepless nights, even with Federal deposit insurance sitting behind the first $100,000 of potential losses.

Money-market fund managers did well to start with, but new savers turned tail last week, reports Forbes, sucking out $7.2 billion as stories spread of fund values slipping below the dollar. Higher-return funds like Schwab’s YieldPlus got caught in a “death spiral” of plunging asset prices, says the Motley Fool. And now the annualized yield offered by apparently “interest-bearing” six-month CDs ticked down from 1.95% to 1.87% this week, says BankRate.com. So don’t all rush in at once!

Lawyers have filed over 70 securities-fraud class actions in the first quarter, three times the amount filed in the first half of 2007.

According to the report: “The targets aren’t only obvious ones like mortgage lenders and credit-rating agencies, either. They now include securities underwriters and mutual funds.”

It’s little wonder Americans are suing Wall Street institutions over the subprime mess.

“The part of the economy in worst shape now is the consumer,” says Bill Bonner. “He’s the one whose salary has not gone up. He’s the one whose house is being foreclosed. And he’s the one who’s got to buy gas and food.

“Banks now have twice as many foreclosed houses as they did a year ago. People take bus tours of foreclosed properties – looking for bargains… and generally depressing prices all over town.

“People are buying fewer SUVs. Hummers are having trouble finding buyers… (We have a brother in Virginia with one; he says his daughter refuses to ride in it, citing environmental damage). Consumers are getting more careful when they go to the grocery store.

“And even in the Hamptons, apparently the housing market is in a slump.”