Investigators: Fed Threatened Bank CEO

Republicans Say Federal Reserve Tried To Force Bank Of America-Merrill Deal

(AP)  The Federal Reserve threatened to force the ouster of Bank of America CEO Kenneth Lewis if he didn't follow through with plans to buy Merrill Lynch & Co., Republicans said Wednesday after reviewing internal documents.

Republicans also said there was evidence that the government tried to restrict information related to the merger from being publicly released.

However, none of the documents showed that the government explicitly instructed Bank of America to hide Merrill Lynch's losses from shareholders, they said.

The House Oversight and Government Reform Committee is investigating claims that top government officials, including then-Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke, urged Lewis to go through with the acquisition and not disclose to shareholders the details of Merrill Lynch's deteriorating financial state.

Lewis was scheduled to testify on Thursday before the panel, which is chaired by Rep. Edolphus Towns, D-N.Y.

Bank of America has received $45 billion from the government's $700 billion Troubled Asset Relief Program. As part of that money, the bank received $20 billion in January after Lewis requested it to help offset mounting losses at Merrill Lynch.

According to an internal memo prepared by the committee's Republican staff, Paulson and Bernanke "put a gun to the head" of Lewis and Bank of America's board of directors to force the merger even though Lewis "felt it was his duty to his shareholders to try his luck in the legal system and back out of the deal."

As proof, Republicans cite several documents including an e-mail by an employee at the Richmond Federal Reserve who said Bernake had made it clear that if Bank of America backed out and needed financial assistance, "management is gone."

Just a few weeks after the deal was completed, Bank of America's fourth-quarter earnings report showed the hit its balance sheet took on the Merrill Lynch transaction, making Lewis the target of shareholder anger.

In January, Bank of America reported a $2.39 billion fourth-quarter loss and Merrill Lynch disclosed a loss of more than $15 billion.

[jjreding-2009]

Wait a minute. What do the Republicans have anything to say about this? Bernanke and Paulson were both Republican appointees. Seems to me they had better look to their own before they start spewing about the Democrats policies only a few months after Obama took office.

I'm so sick of hearing about Republicans this and that. They are the party of 'no' and they haven't put forward ANY plans that would change anything, especially that loudmouth Boehner. Until the GOP comes up with something concrete that will actually make a difference they really need to shut up.

[whitemale08]

aphaa--Excellent post,

I must add that 'reform' of the banking system is not enough, we must put the entire Federal Reserve System into receivership and bankruptcy re-organization as outlined by Larouche.

Lyndon Larouche pronounced the death of our present monetary system back in August of 2007 in a historical webcast.

I suggest everybody who is interested in saving this country go to larouchepac.com and pressure congress and the institution of the presidency to implement the only FDR policy that only Larouche knows how to do.

[alphaa10]

WANT TO TALK ABOUT PRESSURE ?

AP reports, "According to an internal memo prepared by the committee's Republican staff, Paulson and Bernanke "put a gun to the head" of Lewis and Bank of America's board of directors to force the merger..."
---

So, the GOP wants to complain about pressure on BOA, none of which deceived stockholders?

This, from the GOP-- the very party whose policy of DEregulation fostered the Wall Street debacle last fall?

The same party which (under Bush and Paulson) issued a ransom note demand last fall to leaders of congress and the American taxpayer?

Where was the GOP protest about pressure from Paulson, then?

The current GOP protest about pressure on the BOA is a mockery of right reason, and the miniscule integrity the GOP has left.


WHAT THE RANSOM NOTE SAID

The Bush-Paulson ransom note demand was called a "bailout" and its lavishly expensive terms were imposed in a terse, two-page note pushed at congressional leaders in a tense, closed meeting last fall by Paulson.

The Bush-Paulson note said there would be no investigation, no congressional hearing, no public details. It was a naked demand-- "Yer money, or yer economy goes down the tubes!"

Bush and Paulson said congress must agree to their demands immediately, or face the collapse of the American financial system in a matter of days. Now, that is pressure.


WALL STREET BANKS ALSO PRESSURED CONGRESS

Amazingly enough, the banks, themselves were not worried. They already planned to hold onto their loot, and beg for more. They called their favorite congressmen to begin a chorus of "Let's Help Out Our Banks-- It's the Patriotic Thing to Do". Most of these congressmen-- not all-- were GOP.

Besides speaking to their GOP congressmen, most of the bankers' heavy breathing was reserved for close conversations with their closest friends, Bush and Paulson.

And after that banker pressure, Bush and Paulson pushed their two-page ransom note at congress, demanding $700 billion of taxpayers-- but with no terms or obligations for the banks.


AFTER THE ROBBERY-- BANKERS FEELING NO PAIN, CERTAINLY NO PRESSURE

Having no other information but what Bush and Paulson offered about the plan, wiser heads in congress at least made sure their enabling legislation divided the payments-- a vital means of determining what was actually going on, before the banks rode away with all the loot.

But monitoring, only after a fashion. Because when the first of two shipments of taxpayer dollars was given to the banks, a feeding frenzy erupted, with money going to Paulson favorites-- banks he considered worthy of survival.

Settling old scores through Paulson, the bigger of the banks bought the smaller in a market massacre that might have amazed Darwin. Bankers cackled to their peers in confidential memos on the taxpayer bailout. That money, they said, was their means to buy out the competition, and make the market even more hostile to consumers ("Monopoly means never having to say you are sorry.")

And then, the sheer criminal plunder began. AIG scheduled a posh weekend costing taxpayers only $440,000. Not to be outdone, Bank of America had such confidence in their friend Paulson, CEO John Thain gave away $4 billion to his friends just before he put on his beggar's costume for taxpayer help. And so it went.

Bush professed sympathy with the plight of homeowners and promised help, but words are very, very cheap. Bush did not write a single provision to help homeowners into the ransom note he and Paulson drafted on behalf of Wall Street banks.

Ironically, the millions of Americans faced with foreclosure are the same taxpayers whose money bailed out the banks now threatening them with foreclosure.


PUTTING PRESSURE WHERE IT BELONGS

With the bailout, American taxpayers become major shareholders in the nation's largest banks. Of course, banker that he is, Paulson made sure taxpayers enjoy no serious leverage, voting rights, etc.-- but all that can be, and should be changed.

We taxpayers, whose lifeblood now goes to help the banks, truly own a controlling share. And be sure of this-- the banks will need more of our money unless reform happens.

Banking reform is more than overdue, and everybody knows it. But none on Wall Street breathed a word because.... they were all in it together, for better or worse. Literally enough, Wall Street bankers could not help themselves.

Another poster in this forum has asked, "Is class warfare upon us?" Too late-- that war began months ago, with Paulson's brazen ransom note to congress and the American middle class.

So, yes, this is all about pressure-- but putting pressure where it belongs. Americans must keep the pressure on congress to reform American banking, and make the bankers serve the country which made them wealthy.

Failure to regulate-- as with the GOP doctrine of DEregulation-- is what gave us this financial disaster.

[brianbwb-2009]

"...even though Lewis "felt it was his duty to his shareholders to try his luck in the legal system and back out of the deal."

Right, but he didn't feel it important enough to call the Fed on their threat, take it public, and protect the shareholders, he considered his own arse more important. Surely at his pay grade he had the financial means to live unemployed for the week or so it would take to land a new position at one of his competitors.