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Banks Oppose Shareholder Resolution of US Economic Security

Bank of America and Citigroup are exerting extraordinary pressure on the Securities and Exchange Commission (SEC) to avoid enforcement of a shareholder resolution that would institute a board committee on U.S. Economic Security. On the eve of a House Financial Services Committee Hearing, where heads of several banks receiving taxpayer bailouts are set to testify, the investor who filed the resolution is speaking out.

Harrington Investments Inc. (HII), a Socially Responsible Investment firm in Napa CA, filed the resolutions on behalf of shareholders in an attempt to ensure that board members consider the impact of bank policies on the U.S. economy. The resolutions would amend the corporate bylaws to establish a board committee to review the affects of company policy on US economic security.

The two banks together have sent a total of eight letters and memoranda to the SEC to keep the resolution off the 2009 proxy. It is one of the most aggressive efforts in recent memory to try to block a shareholder resolution. Attorney Sanford Lewis, representing the proponent, Harrington Investments Inc., sent letters to the SEC rebutting each of the bank's claims. According to his most recent reply letter on February 4, Lewis states that he and HII remain firm in their opinion that the resolutions are not excludable under Delaware law, where the two banks are chartered.

Bank of America and Citigroup became the focus of the HII initiative because they are two of the biggest players in the selling of toxic assets and have received a total of $90 billion in Federal assistance under the Troubled Asset Relief Program (TARP).

"Our government has handed over literally billions of taxpayer dollars to failed financial institutions with almost no strings attached. Now the banks are attempting to deny shareholders the right to vote on a proposal to help ensure that the banks are doing what they can protect our country's economic security," said HII president John Harrington. "It's shameful."

Letter and legal opinions filed by the banks asked the SEC not to take enforcement action against the companies if they do not put the Harrington resolutions on their respective ballots.

As Bernie Madoff whistleblower Harry Markopolos recently told the House Financial Services subcommittee, "The SEC is ... captive to the industry it regulates and is afraid to bring big cases against prominent individuals. The agency roars like a lion and bites like a flea and is busy protecting the big financial predators from investors."

With the new administration in place, Harrington is hopeful there will be a change in attitude an enforcement policy at the SEC. It remains an open question as to whether the SEC chair, Mary Shapiro, will apply her enforcement policies to allow shareholders to vote on the U.S. Economic Security resolutions or continue Christopher Cox's policies of caving into the narrow self-interests of Wall Street bankers.