Paulson Throws Bernanke Under the Bus, Backs Ken Lewis 54 comments
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New York Attorney General Andrew Cuomo has released a letter with accompanying addenda that he sent to key Washington officials. In it he says that Henry Paulson essentially corroborated Ken Lewis’s testimony concerning the acquisition of Merrill Lynch. Paulson also testified that the threats made to Lewis concerning his replacement should the Merrill deal not be completed were done at the request of Fed Chairman Ben Bernanke.
In an interview with this Office, Secretary Paulson largely corroborated Lewis’s account. On the issue of terminating management and the Board, Secretary Paulson indicated that he told Lewis that if Bank of America were to back out of the Merrill Lynch deal, the government either could or would remove the Board and management. Secretary Paulson told Lewis a series of concerns, including that Bank of America’s invocation of the MAC would create systemic risk and that Bank of America did not have a legal basis to invoke the MAC (though Secretary Paulson’s basis for the opinion was entirely based on what he was told by Federal Reserve officials).
Secretary Paulson’s threat swayed Lewis. According to Secretary Paulson, after he stated that the management and the Board could be removed, Lewis replied, “that makes it simple. Let’s deescalate.” Lewis admits that Secretary Paulson’s threat changed his mind about invoking that MAC clause and terminating the deal.
Secretary Paulson has informed us that he made the threat at the request of Chairman Bernanke. After the threat, the conversation between Secretary Paulson and Lewis turned to receiving additional government assistance in light of the staggering Merrill Lynch losses.
Earlier today there were reports on CNBC that Bernanke denied the accounts.
I’m not going to editorialize right now. I need to think this through.
One thought, though. Is there any way at this juncture that Ken Lewis is still the CEO of BofA by the end of this week?
More: here (Cuomo’s letter and related material) and here (last night's post on the subject)
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This article has 54 comments:
fas⋅cism /ˈfæʃɪzəm/ Show Spelled Pronunciation [fash-iz-uhm] Show IPA
–noun 1. (sometimes initial capital letter) a governmental system led by a dictator having complete power, forcibly suppressing opposition and criticism, regimenting all industry, commerce, etc., and emphasizing an aggressive nationalism and often racism.
2. (sometimes initial capital letter) the philosophy, principles, or methods of fascism.
3. (initial capital letter) a fascist movement, esp. the one established by Mussolini in Italy 1922–43.
Altaman, good observation.
My question is, who is lying? Coumo? Probably not. Paulson? Wouldn't put it past him, but this time, I don't think so. Looks like Bernanke.
My guess is he said something to Paulson like "Will no one ease me of this turbulent Priest!?", and Paulson did the rest from there, on his initiative.
User 400&change, and who is going to save us from the liberal democrat fascists?
Instead of making sure he knew what he was talking about, Lindmark assumed Bernanke had been interviewed and lied.
What does MAC stand for?
On Apr 23 03:56 PM Jim Benham wrote:
> Mr. Lindmark:
>
> What does MAC stand for?
It's scary to know how bad business decisions are being forced on CEO's by governments of both parties, in the name of supposed national interest. The key of course is to split up these "too big to fail" entities. It is really not that complicated.
While I am upset at our government. Lewis did make sure he could value the assets lower than what Merrill said they were worth, and using this lowered valuation threatened to would walk away. I think therefore he was also blackmailing the gov't for more money at the same time using doctored books. they all should be in jail.
If I was a regulator I would tell him the same thing. The time for making up his mind was before agreeing to acquire MER not after.
Also if he saw things getting worse he should have had the gumption to terminate bonuses.
The whole episode should create a new verb. In addition to poor decision making I think he got "Thained".
Onto sweeping partisan statements about Democrats and Republicans: the more extreme the proclamation, the weaker the grasp the writer tends to have on basic facts. In other words, dolts are seldom informed.
Mr. Cowie,
Absolutely spot on. Break them up into regional regulated depository institutions any one of which is forbidden from holding more than 5% of insured deposits in the country and sell off the rest of the tomfoolery to investors with NO GUARANTEES of any kind.
The problem with doing what must be done is that Congress -- both parties -- is riddled with "representatives of the People" sucking the financial industry tit.
On Apr 23 04:42 PM William Cowie wrote:
> Does it sound to you like Lewis is setting up things so his golden
> parachute (with many, many zeroes) won't be blasted as heavily? Earlier
> comments indicate that he's tired of being vilified for a decision
> into which he was coerced.
>
> It's scary to know how bad business decisions are being forced on
> CEO's by governments of both parties, in the name of supposed national
> interest. The key of course is to split up these "too big to fail"
> entities. It is really not that complicated.
>
>
>
Do I know the above scenario is true? Absolutely not. But it's my best guess.
" Do not invest in closed societies where corruption and opacity render it impossible to construct credible risk/return profiles. Shareholders , debt providers and tax payers are not only precluded from decision making but are also excluded from access to highly material facts".
We thought this meant stay away from Russia and China and Indonesia. Comrades, little did we know..........
On Apr 23 02:20 PM toomuchgas wrote:
> I thought fascism was supposed to be good for business. More like
> mass stupidity. The democrats really know how to run businesses.
> They learn it in Congress and academia.
Seems to me, the major players are motivated by factors which are harmful for the people who will in the end pick up the tab for all of this - the US taxpayers.
On Apr 23 02:20 PM toomuchgas wrote:
> I thought fascism was supposed to be good for business. More like
> mass stupidity. The democrats really know how to run businesses.
> They learn it in Congress and academia.
He had a fiduciary duty to invoke the material adverse change (MAC) clause and reject the Merrill deal. Ironically, the article in yesterday's WSJ, which should be, by its very charter defending shareholders, completely buys into the "Lewis as victim" defense. This refrain has become so familiar since the failure to renegotiate the CountryWide deal, the feigning ignorance of the Merrill financials and most insulting of all to shareholders, the recent denial of knowledge about the Merrill bonus payments, when in fact his signature was on the very document authorizing it.
Anyone who had the stomach to get throught the entire WSJ article is now completely familiar with the legal theorem that heresay has no probabative value whatsoever. In every single instance, by either a prior quotation from Lewis or statement from a spokesperson, you read nothing but what Lewis imputed to the thoughts of others with absolutely no corrobaration. The remarks by Paulson only prove that point that Lewis had a duty presure or not.
If you have not read that article, please do so.
Yesterday's WSJ article was a highpoint in the journalistic use of heresay to suggest makeRegardless of how much pressure he claims Bernacke and Paulson applied, he would have been vindicated in any court. As he did not, most likely he will be prosecuted, which he deserves. any pressure by government officials would have been he would have been completely protected
If you read yesterday's front page article in the Wall Street Journal, you could choke on the amount of heresay used to support the writer's thesis that Lewis was the victim of duress applied by Bernacke and Paulson. Remarks like "I felt I was being pressured The entire first half of the article cited either testimony or quotations from Lewis' spokespeople citing that he "felt pressured" Almost every paragraph in the first half of the article was either a paraphrase from Lewis or a
When Lewis says that Bernacke or Paulson told him to do something given how Lewis himself nee
Thanks
first there was butt covering (prevents homosexual rape, etc.)
now being thrown under the bus (homicide, disdain for
public transportation, etc.) If you don't know who saved your butt, Tom,
you're go0ing to end up having trouble finding the bathroom
Please keep focus here. Please do not get into Democrats vs Republicans thing. Please do not dismiss this as "what else do you expect"?
Please focus on what you can do to ensure that this case is used to emphasize the need for justice and return to honesty. For a long time, common public has lived with corruption and trickery at high levels. It is time to return to fundamentals of honesty, hard work and justice.
Corrupt people are using these turbulent times to serve their needs. Are we using these times to reinstate good values of life?
Next, his "fiduciary duty" to shareholders was to squeeze the most money and the best terms out of his new creditor, the government. He figured threatening to back out of the deal would do that. It was certainly worth a shot. In a best case scenario, BAC would get to keep the govt. loans but not have to take on Merrill's losses. Merrill would go under, but the loans would allow BAC to survive the losses.
Paulson anticipated such brinksmanship and was having none of it. As a creditor and shareholder to BAC, the govt. had little leverage but they could probably get the already-on-thin-ice board and management fired. Paulson alluded to that leverage, and the brinkmanship was over.
Results of this minor skirmish: BAC lost, taxpayers won.
Jack Bauer Can't Stop 'The Goldman Conspiracy'
www.marketwatch.com/ne...={BE0D1772-A628-454D-8...
On Apr 23 03:22 PM notblind wrote:
> It seems that a couple of people here are not aware that this took
> place in the Bush administration.
On Apr 24 04:16 PM MarvinMBA wrote:
> It is obvious in the public interest to keep ML alive...many would
> suffer if ML declared Bankruptcy. In this case the right thing
> was done and nobody should lose their job over this deal...MarvinMBA
Now, we have a President who want's to raise taxes on the top 5% from 36% to 39%.
.
.
.
FASCISM!!! FASCISM!! FASCISM!!!
On Apr 23 02:08 PM altaman wrote:
> This is what happens when you have a fascist government. You may
> not want to face realitiy but it is what it is.
>
> fas⋅cism /ˈfæʃɪzəm/ Show Spelled Pronunciation [fash-iz-uhm]
> Show IPA
>
> –noun 1. (sometimes initial capital letter) a governmental system
> led by a dictator having complete power, forcibly suppressing opposition
> and criticism, regimenting all industry, commerce, etc., and emphasizing
> an aggressive nationalism and often racism.
> 2. (sometimes initial capital letter) the philosophy, principles,
> or methods of fascism.
> 3. (initial capital letter) a fascist movement, esp. the one established
> by Mussolini in Italy 1922–43.
Let's put them in the ring and may the best liar win. It will be a close one. Here's a nice quote from the SEC about this.
optionarmageddon.ml-im.../
REPORTER: If Henry Paulson and Ben Bernanke really told the CEO of Bank of America to keep quiet about losses at Merrill Lynch, they were probably breaking the law. That’s according to Lynn Turner, former chief accountant at the SEC.
LYNN TURNER: If these allegations are proven true, both Bernanke and Paulson should be prosecuted by the SEC to the fullest extent of the law.
On Apr 24 06:57 PM Moon Kil Woong wrote:
>
> Let's put them in the ring and may the best liar win. It will be
> a close one. Here's a nice quote from the SEC about this.
>
> optionarmageddon.ml-im.../
>
>
> REPORTER: If Henry Paulson and Ben Bernanke really told the CEO of
> Bank of America to keep quiet about losses at Merrill Lynch, they
> were probably breaking the law. That’s according to Lynn Turner,
> former chief accountant at the SEC.
>
> LYNN TURNER: If these allegations are proven true, both Bernanke
> and Paulson should be prosecuted by the SEC to the fullest extent
> of the law.
>
Then, Paulson would set everything up such that everybody would blame the whole thing on some glasses wearing guy from the academia.
I'm not saying it's true or false as I don't know if Merrill was as large a counter party to Goldman as say AIG was.
On Apr 23 02:08 PM altaman wrote:
> This is what happens when you have a fascist government. You may
> not want to face realitiy but it is what it is.
>
> fas⋅cism /ˈfæʃɪzəm/ Show Spelled Pronunciation [fash-iz-uhm]
> Show IPA
>
> –noun 1. (sometimes initial capital letter) a governmental system
> led by a dictator having complete power, forcibly suppressing opposition
> and criticism, regimenting all industry, commerce, etc., and emphasizing
> an aggressive nationalism and often racism.
> 2. (sometimes initial capital letter) the philosophy, principles,
> or methods of fascism.
> 3. (initial capital letter) a fascist movement, esp. the one established
> by Mussolini in Italy 1922–43.
i dont' think lewis's "threat" to back out of the deal was simply an 11th hour attempt attempt to extract further concessions from government. he knew his firm was "too big to fail" and that the government, at any time, would do whatever it took to back it.
it's likely that lewis simply got cold feet and felt that he had legal basis for invoking the MAC clause. apparently the only thing that stopped him was the government threat to remove him as CEO and to replace the board. funny....i thought only shareholders could do that.
lewis put his personal interests ahead of the firm. period. he didn't have the balls to tell paulson to stick his threats up his a**, which he should have done and could have done, making his own threat to back it up with his personal resignation and a public villifying of a federal reserve and treasury department run amok, if necessary. i think that might have cooled the jets of paulson and bernake and left them to sink in their own sh**.
lewis failed on multiple levels. nobody in the history of banking deserves termination more than he.
When business controls the government it's called oligarchy.
The United States is an oligarchy.
Russia has become a partial oligarchy but the communist party still has more power than the oligarchs.
Hitler was called a fascist because he controlled all of the large businesses in Germany, including the German affiliates of General Motors and Ford who were forced by the Nazi party to make the tanks that were used by Germany to invade Poland.
The American governments are controlled by business interests, for the most part, with some notable exceptions in various cities around the country such as Berkeley, California.
You'll know fascism has arrived in America when brown shirts start roaming the cities with AK-47's to round up 'undesirables' such as Mexican and African American thugs, and homosexuals and other 'perverts', and put them in concentration camps.
We are a long way from fascism, but so was Germany in 1929. Then again, Germany had a long history of totalitarianism before 1933, and America has been a business civilization from 1776, at least.
The American banking and automobile oligarchy is using the government to save their personal fortunes which is the OPPOSITE of fascism.
It will become a socialistic move if government bureaucrats move in and take over all upper level management positions in the banks and replace them with GS level positions which are independent of politics and based on examinations and educational backgrounds. Not impossible but highly unlikely.
Socialism and fascism, no. Oligarchy, yes.
But then again, it is the group in power (the oligarchy) who control the national discourse by defining the terms to be used:
Socialism is government regulation.
Fascism is control of the government by business.
All people are equal but some people are more equal than others.
Oligarchy is an unpronounceable word.
That's not fascism!
On Apr 25 02:33 AM Gary A wrote:
> The first comment only tells part of the story. First fascism is
> control of the government by private industry. In this case it is
> the hedge funds. Bernanke is representative of the financial system
> in power, ie the hedge funds and he is not a government employee.
> He is a private individual dictating to the government of the United
> States. There will be no sovereignty of the government of the United
> States until the hedgies and the fed are toppled from power. Period.
When business controls the government you don't have fascism but control by private, very rich individuals of the government. They usually go back and forth from their businesses to government. At some point in time however they might think being a high government official is preferable to being a businessman and then they might start moving towards true fascism.
Look at this article. (There are many articles like this if you Google for them): www.banned-books.com/t...
Also, communism is a system where the are NO private business at all. (Or only a few as in Cuba today. Only very small businesses are allowed in Cuba such as private home restaurants, etc.) The government owns and controls all businesses as was the case in the Soviet Union before its collapse. They aren't really businesses either unless you consider the U.S. Post Office a business ;)
We shouldn't argue too much about terminology however. I agree that whoever these guys are and whatever you call them, they've got too much power and are quickly moving away from the country that was envisioned by the Founding Fathers.
Why not just call them dictators with totalitarian minds who don't care about personal individual liberty except for the very few who can afford them?
On Apr 25 02:07 PM Gary A wrote:
> Sorry Jim Carey, you are wrong. Fascism has always been the control
> of government by private business. Control of business by government
> is communism. Fascism is exactly what is going on here. Bernanke
> is appointed by the president but has absolute power. The 12 federal
> reserve banks are private entities. You can see that on hoovers and
> on wikipedia. We have a subtle but effective form of fascism here
> and people need to wake up. Read my website if you are really interested
> in understanding what is going on here.
In other words, BoA board violated their contractual Due Diligence responsibilities to their shareholders just to protect their own personal interests.
Regardless of the legality of the Treasury and Fed actions, BoA Board committed crime, therefore, exposing themselves to investors lawsuits.
PS
To some illiterate posters: Fascism and communism are just different brands of socialism. During Hitler times, the government controlled most of private business activities and prohibited profit reinvestment.
Consequently, it is Obama administration and the present Democratic Congress are moving America to a "centrally planning economy". Regardless of moving to fascism or communism, America can kiss good bye to its democracy and personal freedom.
Final piece of statistics:
- Stalin killed 7x times more people than Hitler. Unfortunately for Hitler, he lost the war.
- As for "the final Jewish solution", if Stalin was living for 1-2 years longer, there would not be any Jews left in Europe alive.
Oligarchy: en.wikipedia.org/wiki/...
Fascism: en.wikipedia.org/wiki/...
What's in a name? Richard Nixon or Tricky Dick, it's still the same guy.
On Apr 26 02:15 AM User 357705 wrote:
> Fascism is the melding of the interests of business with those of
> the government. Perhaps more accurately the oligarchs have have taken
> the first steps toward fascism.
The government did their job of containing the excessive panic in the private sector last year.
This year we saw how the gov't tried to impose the straight-jacket by which the private sector can operate. Not good for an economic recovery to start. Private sector initiative has proven much better in the long run rather than state-induced economic recovery.
wamustory.com/
wamuqd.com/
www.wamu-shareholders-...
wamuequity.org/history...
Stalin et al, noticing that nationalist socialism was out competing their own brand of (allegedly) 'international' socialism, came up with the notion that such fascist ideologies were somehow the antithesis of communism. They were not, they are not. It was a propaganda ploy, which worked so well, we are still encumbered with it today.