Yet another banking-chief head may be set to roll. Bank of America CEO Ken Lewis was subpoenaed by New York State Attorney General Andrew Cuomo late last week. Cuomo is looking into whether Bank of America withheld information about Merrill’s losses, as well as bonuses to Merrill employees, from investors, a violation of state law. Also subpoenaed were Bank of America chief administrative officer J. Steele Alphin and Andrea Smith, who helped craft compensation packages for some Merrill executives.

According to The Wall Street Journal, among other things, investigators are looking into how Merrill could have set bonuses and let employees know about them before the quarter was even over. They are also looking into what executives approving such bonuses knew about Merrill’s staggering losses for the quarter.

In related news, Lewis tried to squash talk that the government is about to seize the bank at a meeting of senior executives on Thursday, saying that “policy officials” had assured him that such a move was not even on the table. But Washington legislators including Senator Lindsey Graham (R-SC) has said publicly in recent weeks that nationalization of U.S. banks is an option that may need to be considered.

Ponzi Pileup

You might be forgiven for thinking that the U.S. financial system is just one giant Ponzi scheme. Federal prosecutors are now investigating whether R. Allen Stanford of Stanford Financial Group, charged with an alleged $8 billion investment fraud, was operating a Ponzi scheme. Authorities caught up with Stanford in Virginia Thursday: He was served while in a car with his girlfriend. Though his whereabouts were unknown earlier in the week, authorities say he was not actually a fugitive. No criminal charges have been filed against Stanford, who has yet to respond to the civil charges against him.

Sir Robert Allen Stanford may in fact, be the No. 2 multi-billion dollar Ponzi that Harry Markopolos said he was going to serve up to the SEC. Stanford, who is from Texas, was not knighted by Britain, but by...Antigua, where he is a big supporter of cricket. He is also, apparently, a big fan of cricket players’ wives! Meanwhile, his father insists, he wasn’t raised to be a crook.

As The Wall Street Journal notes, “James Stanford said his son was an average, rambunctious boy who loved playing football and basketball. In college, at his father's alma mater, Baylor University in nearby Waco, he loved scuba diving and weight lifting. His roommate was James M. Davis, who later joined Allen Stanford at Stanford Financial as chief financial officer.”

If Stanford was, indeed, operating a ponzi scheme, it would add to what has become something of a Ponzi pileup in the last few months, with at least eight alleged Ponzi schemes uncovered by regulators. As Omaha oracle Warren Buffet has said, when the tide goes out, you learn who’s been swimming naked. And now, here’s a list of who’s been caught skinny dipping:

Feb. 19, 2009 SEC halts Ponzi scheme targeted at deaf investors in the U.S. and Japan, charges Hawaii-based Billion Coupons with swindling $4.4 million out of investors.

Jan. 15, 2009 SEC charges CRE Capital and James Ossie with conducting $25 million Ponzi scheme.

Jan. 8, 2009 SEC charges investment fund manager Joseph S. Forte for conducting $50 million dollar
Ponzi scheme since 1995.

Dec. 30, 2008 SEC halts $23 million Ponzi scheme & affinity fraud targeting Haitian-American investors.

Dec. 11, 2008 SEC charges Bernard L. Madoff for estimated $50 billion Ponzi scheme.

Nov. 12, 2008 SEC charges Biltmore Financial Group for operating multi-million dollar Ponzi scheme.

Oct. 30, 2008 SEC sues Miami resident for conducting $30 Million Ponzi scheme - Andres L. Pimstein, The Bottom Line of South Florida, Inc. and Summit Trading LLC.

Oct. 6, 2008 SEC charges Norman Hsu with defrauding investors in $60 million Ponzi scheme

Morgan Stanley and Sin Stocks

These days, the economy is such a mess, even sin businesses, usually buoyed by those who indulge in vices to cool their recessionary angst, are getting killed: Sales of porn, gambling and alcohol are taking a hit. Beer demand is down 14 percent. Check out the chart from fivethirtyeight.com, by way of Clusterstock.

At least Morgan Stanley seems to be benefitting from the turmoil at Wall Street firms and in the current market. Morgan has been on something of a tear lately, poaching brokers from rival firms with generous recruiting packages. Most recently, it has picked up teams from Wachovia Wells Fargo, UBS and Bank of America’s Merrill Lynch.