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Published by:
Blavatnik School of Government, University of Oxford (2019)
Revision date:
20 pages
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Facing imminent collapse during the peak of the Global Financial Crisis (GFC) of 2008-09, investment bank Merrill Lynch (ML) received a new lease on life as it was acquired by Bank of America (BofA). The deal was reportedly encouraged by the US Treasury which sought to avoid major contagion of failing banks. Later it emerged that BofA had failed to disclose to its shareholders, in advance of their approval vote of the USD50 billion purchase, that USD5.8 billion was being earmarked for ML executive compensation. In the wake of public outrage of bank bailouts and bank executive pay, the US Securities and Exchange Commission (SEC) brought a formal complaint against BofA, together with a pre-negotiated USD33 million settlement agreement, to the court of US federal judge Jed Rakoff for final approval. The US Supreme Court discouraged judges from second-guessing the executive branch of government in granting such approvals, but Rakoff questioned whether the settlement amount was proportionate to the scale of the misrepresentation. Moreover, he considered whether justice was being served as BofA shareholders, who were the victims of the misrepresentation, were being asked to bear the settlement cost, over the managers who had overseen the acquisition. Rakoff pondered whether to reject the settlement agreement and instead order the SEC to pursue action against the relevant individuals.

Teaching and learning

This item is suitable for postgraduate and executive education courses.


Bank bailouts; Courts; Judiciary; Judicial review; Judicial decision-making; Separation of powers; Global financial crisis; Public interest


The events covered by this item took place in 2009.

Geographical setting

United States
New York City

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Featured protagonist

  • Jed Rakoff (male), US Federal Judge

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