Ken Lewis: The Government Made Me Do It!

On Thursday, Bank of America (BAC) CEO Kenneth Lewis stood before house lawmakers and proclaimed: “They made me do it.” He was pouting and pointing at the federal government, or more specifically, at former Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke. He called them bullies and told lawmakers that he “really, really, didn’t want to buy Merrill Lynch.”

Ok, so maybe that didn’t really happen, but it might as well have. Lewis was called before a congressional committee to clarify his claims that federal officials pressured him into acquiring Merrill Lynch and hiding from Bank of America’s shareholders the financial problems Merrill Lynch had. Lewis has already been stripped of his Chairman title by angry shareholders and still finds himself under intense scrutiny by the government. According to emails sent between Lewis and federal officials, he asked for a written document that explicitly absolved him from any legal risk should any shareholder lawsuits arise. He has said that he does not recall ever sending or receiving such emails. Paulson and Bernanke will soon be called to testify and answer these allegations.

This whole theatrical show continues to be nothing more than a “he said, she said” scene. Lewis doesn’t matter anymore. He’s just another incompetent CEO who should be working as a janitor and wondering how his life ended down the “toilet”.

What’s really infuriating, aggravating and simply maddening is the government’s role in all this.

When did the government turn into the “Big Bad Wolf?”

When did the government decide it was time to play musical chairs with the public’s trust?

Instead of coming forward and answering these allegations, Paulson and Bernanke seem nowhere to be found. They’ve hidden themselves amongst the shadows and are just waiting to be found like two running troublemakers, which is essentially what they are. They put Bank of America in a position where they had to get emergency bailout money in order to keep itself afloat. They have caused Bank of America to lose $108 billion dollars in capitalization since the merger of these two companies, and all for what? To save Merrill Lynch from bankruptcy, a company they knew could put Bank of America in financial peril right after its recent acquisition of Countrywide Financial? What a joke.

The government turned its back on Bank of America’s shareholders, but more importantly, they turned their backs on the American people who had to come and save Bank of America with their hard earned tax money. The government isn’t the only one to blame. Obviously, Lewis should have known better and protected his shareholders, not his board members who were being “threatened” with removal. He should have told the government: “Thanks, but no thanks.”

Because at the end of the day he managed to forget something - he forgot that officials, congress and even the president aren’t the government.

The People are the Government.

Comments

[Ferdinand E...:]

What is it that I call The Economist? Now I remember: London wine-bar gossip. I can just picture the Oxbridge wordsmith who wrote the above piece of junk skurrying back to the Economist's offices late at night to hack out his weekly quota of political wisdom. Of course, some thinking was necessary. Take for example the last sentence in his 'piece': The People are the Government. He deserves a 'first' for that one.

Jun 12 08:32 AM

[fireball:]

the people are the government? taxation without representation comes to mind.

Jun 12 08:47 AM

[rm:]

Actually no, the people are NOT the government.

Perhaps they should be, but they're not. And they haven't been for a long time.

OTOH, perhaps they should not be. So many of those who vote have absolutely no grasp of the issues at hand. We've brought this on ourselves by relinquishing / "delegating" the repsonsibility of monitoring important affairs.

And no, watching Colbert, The Daily Show, and the Tonight Show do not qualify as keeping oneself informed.

Jun 12 09:28 AM

[Robert Jung:]

The next revolution is at hand.

Jun 12 09:32 AM

[tlsc:]

Few missing questions that people (and the congress men) seem not to take note in the Fed and Treasury action
1. Bernanke said that he viewed Lewis's threat of using the MAC as a bargaining chip. What is this bargaining chip? Is this to get more help from the Fed and Treasury or to bargain for a cheaper price to acquire ML? If the latter, than Bernanke called Lewis's bluff. If the latter, than see below.
2 Bernanke viewed that the use of MAC is not credible which suggested that he did not believe that the MAC could be used. If he did not believe that MAC could be used, and if Lewis indeed used it to get out of the deal and failed, not only did BofA had to pay penalty, it could also severely weaken BofA, not to mention ML and the economy. If this is the case, does this not call into judgement of Lewis and the Board in using/approving the use of the MAC, and warrant for their removal? and if so, the call to remove Lewis and the Board is not a threat but a considered decision.

Jun 12 09:34 AM

[Buckoux:]

Lewis' guilt or innocence (?), to me, depends upon who-called-who. If the Treasury/Fed called Lewis to succor a bankrupt Merrill Lynch for the good of the economy, then Lewis gets a pass. If Lewis wanted ML and was driving a hard bargain, as the Fed wants the public to believe, Lewis should be hung by his thumbs. As a BOA shareholder I watched all this play out through last Fall, Winter & Spring". Personally, I think Treasury & Fed stuck it to Lewis and BOA.

Jun 12 12:48 PM

[wtp:]

I worked for BofA for half the '90s. The bank that was begun by one man on the San Francisco docks to enable loans to the common man, as they mentioned five times during the interview screens. Screw the customer, screw the shareholder, screw the employees for the bottom line was its current mission, same as that of its banking peers. It'll only get worse now that powerful banks at this level are reeling under bad bets and even hungrier for fees, their backup welfare supply. Banking could probably still be useful for us if government didn't choose to be its sock-puppet, but as things are I think even a pure barter system would serve us better, at least while the lobbyists are still in town.

Jun 12 01:32 PM

[Jasper M:]

If only commenter DannyBoy would read this article (or, better yet, watch the hearings, I might have saved pages and pages of responses.
: )

Jun 12 01:33 PM

[ain't no fo...:]

Listening to Lewis over the past 6 months, I get the sense that he would make a great community banker in a city like Charlotte... if his bank didn't extend beyond the city limits. I think he was just in way over his head and got strong-armed by some slick guys like Paulson and Bernanke (and where was Geithner in the original negotiations, serving tea????).

When Paulson got through stuttering his way through 2008, two of Goldman's biggest competitors had ceased to exist, and a third, Merrill, was tied up and emasculated to some extent as the merger of two very disparate corporate structures and cultures stumbled to its conclusion.

I seem to recall dimly that news stories right after the marriage indicated that when nobody came jumping out of the woodwork to take Merrill, Geithner and Paulson grabbed them both by the neck, hustled them into a room and said... "Listen, this is what you're gonna do and you're not leaving this room until you do it" or words to that affect.

And now, 8 months later, Goldman slaps a buy and a $15 price target on BAC - with friends like this, who needs enemies?

Jun 12 01:48 PM

[fireball:]

on the marketwire this morning-
ceo of bb&t allison was talking about his sound bank being forced to take un-needed unwanted high interest tarp funds in order to spread the damage.

Jun 12 02:30 PM

[American in...:]

You are very confused. Whether or not Bank of America bought Merrily Lynch, the government would have had to bail out the Merril Lynch entity. Either directly or indirectly by giving capital to the merged
Merril Lynch/Bank of America entity.

Your outrage makes little sense.

Jun 12 02:41 PM

[The Lonely ...:]

A. I don't write for "The Economist", it's just a pseudonym.
B. I'm American, born and raised. I still live here, so it's my government i'm criticizing.
C. Ken Lewis sold out his shareholders and the public to listen to two men, Bernanke and Paulson. His duty was to the American public, not the interest of these two men.

Thank you for the comment though.


On Jun 12 08:32 AM Ferdinand E. Banks wrote:

> What is it that I call The Economist? Now I remember: London wine-bar
> gossip. I can just picture the Oxbridge wordsmith who wrote the above
> piece of junk skurrying back to the Economist's offices late at night
> to hack out his weekly quota of political wisdom. Of course, some
> thinking was necessary. Take for example the last sentence in his
> 'piece': The People are the Government. He deserves a 'first' for
> that one.

Jun 12 02:41 PM

[Alan Young:]

Lewis had a fiduciary duty to stockholders to disclose the situation, whether or not he invoked the MAC. The fact that he didn't makes him guilty, regardless of who said what.
I get the impression that he just wanted the deal too much, and lost his perspective as to what his priorities needed to be.
An alternative interpretation might be that he complied with Paulson and Bernanke's wishes for "patriotic" reasons, in which case he should take responsibility like a man and stop whining.

Jun 12 04:22 PM

[Gem Hudson:]

What they have bought into. We are selling our debt but they are selling our debt to IMF bank. Now can we pay up what the Chinese would not buy into? And if we had any understanding, money making is a manufacturing and a marketing of the people's product and is not the fast and the easy money all on an low, low down next to nothing interest rate payments but have no fear. Our banks are paying their TARP funds by stuffing the fed reserve with what the fed reserve stuffed their vault with. Yea it's all possible.

Jun 12 07:22 PM

[FloridaBoy2:]

I think Lewis was salivating about Merrill until it was discovered that they held so much sub prime debt. Then he balked...but Merrill could not be allowed to fail and he got further govt support. However, the share holders should have been informed. That is where KL failed.

Here is another interesting B of A tid bit. Financing could not be found for the 'risky' Golden Gate Bridge. The deal was taken to B of A. The pitch was made to the President of the bank, an Italian immigrant. He looked his office window at SF Bay and said B of A would do the deal.

Jun 27 09:55 AM