Lost in the discussion about Bank of America ( BAC) CEO Ken Lewis' culpability in keeping quiet about losses at Merrill Lynch is this: Did New York Attorney General Andrew Cuomo leak the story? The Wall Street Journal reported Thursday that Lewis told investigators from Cuomo's office that Federal Reserve chief Ben Bernanke and former Treasury Secretary Hank Paulson asked him to keep quiet about surprise losses at Merrill Lynch, which BofA was in the process of acquiring. While I can't prove Cuomo leaked it to the Journal, there are many reasons to believe he did. First, as The New York Times makes clear in a recent profile, Cuomo is a master media manipulator. Second, the reporter who broke the story, The Wall Street Journal's Liz Rappaport, a former colleague of mine at Institutional Investor who also worked at TheStreet.com before I got here, led the Journal's coverage of Cuomo's investigation into auction rate securities. In other words, she is likely much closer to Cuomo's office than she is to Bank of America's top brass. Third, prosecutors leak information about people they're investigating all the time. One veteran New York political PR man tells me Cuomo's agenda, like Elliot Spitzer's before him, and like that of most state attorneys general, is to bag as many big trophies as he can. But who is the trophy here? Ken Lewis? While some observers, including at TheStreet.com believe Lewis should have informed his shareholders of the Merrill problems anyway, others believe the story makes Lewis look sympathetic.
Yves Smith of the blog Naked Capitalism argues that Lewis' camp leaked the story "to remind the great unwashed of how badly Lewis, and extension Bank of America, was treated in the Merrill affair," just as Lewis is under pressure from shareholders for his ouster. "No
expletive way!" says my PR source, who is certain it was Cuomo. But why would Cuomo want to make Lewis look sympathetic? The PR man notes that once you leak a story, you can't control where it goes. But if the Times profile is as perceptive as it seems to be, Cuomo is pretty good at controlling where leaks go. Just wondering: Might Cuomo have some reason to want to make Bernanke look bad? The Fed chief looked like his job was in real trouble a few months ago, but now that the stock market has stabilized, Bernanke is looking a lot better. I have no idea what political alliances may unite or divide Cuomo and Bernanke, if there are any at all, but it seems like it's worth thinking about. He could also be trying to win points with Democratic loyalists by making Paulson look bad, but Paulson is already out of office, and doesn't seem to need much help looking bad these days. Maybe Cuomo is taking heat from the Obama administration or other high-level Democrats because his pay-to-play investigation of New York's state pension fund is causing image problems for Steven Rattner, the financial guru Obama brought in to fix General Motors ( GM) and Chrysler. Maybe Obama wants to get rid of Bernanke, and Cuomo is helping pave the way by leaking Lewis' statements. I have no idea: I'm just throwing out theories. But it makes sense to take a look at the man behind the curtain in this story, and many signs point to Cuomo. A Cuomo spokesman attempted to speak to me off the record about the issue. When I told him he was on the record, he hung up. Rappaport referred my email to a spokeswoman for Journal parent company Dow Jones, who wrote, "We don't comment on newsgathering."