Under New Ownership: Bank Of America

(CBS)  Banks are supposed to lend money, and when they stop - as they have in recent months - the workings of our entire economy are threatened. Credit became so frozen, the government had to step in this past week and take an ownership stake in the country's biggest banks.

On Monday Treasury Secretary Henry Paulson summoned the CEOs of the nine largest banks to Washington - and gave them a massive amount of money so they would start lending again.

The largest of the banks is Bank of America (B of A) - now partly owned by the United States of America.

The head of Bank of America, Ken Lewis, says that when he and the others met at the Treasury Department, it became clear that Secretary Paulson's "offer" was an ultimatum - no negotiations.

"In other words, take it or leave it?" correspondent Lesley Stahl asked.

"Right. Right, right."

"It's said that he told the bankers and you, "This is your patriotic duty," Stahl said.

"I don't remember if he used the word, but there was an element to that," Lewis said, "that this was the right thing for the American financial system, and therefore it was the right thing for America."

"Did you feel that? Was that a persuasive line of argument?"

"Absolutely," Lewis said. "I deeply believe that. I think he was right on."

"Now explain, why was it so important to the government that everybody agreed, that the nine largest banks are ALL in this?" Stahl asked.

"If you have a bank in that group that really, really needed the capital, you don't want to expose that bank," Lewis said.

"In other words, stigmatize it."

"Right, exactly."

"So everybody knows that they're not as good as somebody else."

"Exactly."

"Most of you were just stunned by the amount of money that the government put on the table," Stahl said.

"Yeah," Lewis replied. "At least I was. And I think most everybody else was."

The total was $125 billion of taxpayers' money. Bank of America, Lewis says, didn't need the money … but got $25 billion anyway.

"Do you have any choice in this?" Stahl asked. "In other words, can you take the money and not lend?"

"We wouldn't want to do it that way, because you can make more money lending," Lewis said, "and so the intent will be to use it to grow loans and to make more net income."

But under the Treasury's plan, there's no requirement that a bank use the money to lend. It could use it to acquire weaker competitors - or put it in Treasury bills.

One of the few strings Secretary Paulson attached relates to salaries. A bank would have to pay more taxes if it paid an executive over $500,000 a year.

One of the bankers in the meeting objected, and started arguing with Paulson - and that's when Ken Lewis, a critic of excessive executive compensation, spoke up:

"I did make the point that we needed to stop talking about executive comp and get on with this because that should not stop the deal."

"Actually, you're quoted as saying, 'If this is what's going to stop this, you're out of your mind,'" Stahl said.

"I did use the phrase 'out of your mind.'"

"Because why? Because you thought if it got out publicly … ?"

"No, that the importance of this deal getting done versus these elements of executive comp were just out of sync," Lewis said. "I mean, this was so much more important. And all of us can take a little less money."

With his salary and lucrative stock and options, Lewis took home $25 million last year. But he's one of the few in the business who can be fired without a golden parachute, and he thinks executives on Wall Street have made too much money.

"I think they were overpaid,' he said. "It's more egregious in financial services than any other industry that I know of. We need to cut back compensation in this industry."

"So this is a question everybody wants answered: Is this Socialism?" Stahl asked. "Have we now taken a huge step away from the free-wheeling Capitalism that we've known for the last 30 or so years?"

"I don't know what we'll call it, but it will be different," he said. "And there will be more regulation. The Golden Era of financial services is over, in my opinion."

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[GODADDYawful]

Pretty funny when 60MINUTES gets ***** SLAPPED.

Wasnt 60minutes doing an as-kissing 30 minute special on how special BofA is??? Do your homework 60Minutes! Your starting to embarrass your predecessors w/ your amateur show.

[emcom1]

Credit default crisis next?
My plan is posted on YouTube. Instead of giving $500 Billion of taxpayer money directly to the banks, it should be filtered through the taxpayers.

The treasury should give 2% loans of up to $10,000 to those earning less than $100,000, to be used only (via balance transfer) as a pay down of existing credit card, auto, student or mortgage debt. This gets the money to the banks that they can re-lend, gives taxpayers up to $200/mo in extra cash (i.e. 24% interest down to 2% on the $10k) stimulating the economy negating the $300 Billion stimulus package being considered, (and better than a one time $600 check) and staving off the credit default crisis. The banks would be motivated to re-lend rather than invest in T-Bills due to the loss of the consumer interest on that money, and the treasure is more likely to recoup its money (with interest) since the taxpayers are paying themselves back. Just a thought...

[robert2237]

PJC27- Oh by the way this Red Neck has a education and makes well over the national average.
But I am bitter clinging to my guns, and buying more along with ammo.

[robert2237]

PJC27- Most people who work that includes us Red Necks as you like to call us, will not get a tax cut. The only ones that will be getting a tax cut will be the ones who haven''t work all their life and have no plan on working ever, that is how Obama is getting them out to vote. Promise them money and they will vote for you.

[robert2237]

linkerone- I see those of you who thinks that a company can not pay a person what they think he is due is just a case of hating those who are more successful than you. I do think that if the tax payers own part of the company then we set the pay or in the case of Freddie and gennie we should have set the pay. Oh I forgot Franks and Dobbs did make sure that the management of those two companies got the big bonuses. That might be because they were getting the most money, well Obama was number 3, from them. And Franks had another reason his boyfriend.

[linkerone]

Kenneth Lewis is my new hero in the war on corporate greed. At 7.4 mil annual salary, Mr. Lewis is ranked 174th in Forbes list of CEO salaries. And although head of the world''s largest bank, his salary ranks far less than CEO''s of much smaller banks and financial institutions. But, more importantly, Lewis decided some time ago to stay out of the sub-prime markets as too risky.. That''s the sort of leadership we should have seen in all the financial institutions, and we wouldn''t be in the shape we now see ourselves..

Also, it seems that what many see as Obama''s policy to transfer some of the wealth from the rich to the poor, I see as nothing more than an overdue penalty for corporate greed. The big corporations which make up the pharmaceutical, insurance, and financial markets have for years been systematically stripping the middle and lower income class of all their income, and few precious assets, including their homes and meager savings.

[linkerone]

And please don''t put everyone on the same economic, and educational level, and just say they should have known better. That''s BS, and we all know how today''s marketing tactics are so persuasive. Just look at some of the current campaigns, like "I want it all, and I want it now". We are manipulated, and then ravaged, and raped by the big corporations.

Quite frankly I can find no reason what-so-ever to even consider voting republican, after the last 8 years of Cheney & Bush. Togeather, they, and the Republican dominated Congress during the first 4 years, did so much damage, that our kids will be paying the bills for years to come..

We need change and we need it now!

[linkerone]

Kenneth Lewis is my new hero in the war on corporate greed. At 7.4 mil annual salary, Mr. Lewis is ranked 174th in Forbes list of CEO salaries. And although head of the world''s largest bank, his salary ranks far less than CEO''s of much smaller banks and financial institutions. But, more importantly, Lewis decided some time ago to stay out of the sub-prime markets as too risky.. That''s the sort of leadership we should have seen in all the financial institutions, and we wouldn''t be in the shape we now see ourselves..

Also, it seems that what many see as Obama''s policy to transfer some of the wealth from the rich to the poor, I see as nothing more than an overdue penalty for corporate greed. The big corporations which make up the pharmaceutical, insurance, and financial markets have for years been systematically stripping the middle and lower income class of all their income, and few precious assets, including their homes and meager savings.

[generey]

Cheney has become invisible. Where is he?


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Posted by ERoosevelt08 at 10:07 PM : Oct 20, 2008


Good point!

[pjc27]

I can''t wait to see if these dumb rednecks refuse to take Obamas tax cuts? Are they SO "PRO" America that they will pay more than their due to Uncle Sam? You betcha NOT.