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Bernanke and BoA: Read the Accusation

Bernanke and BoA: Read the Accusation

The Republicans seem intent on arguing that Federal Reserve Board Chairman Ben Bernanke threatened to remove Bank of America CEO Ken Lewis, if BoA backed out of its agreement to buy Merrill Lynch. Mr. Bernanke denied the accusation.

It might have helped matters if someone had bothered to read the evidence. The Post reports part of e-mail from Jeffrey Lacker, president of the Federal Reserve Bank of Richmond: "Just had a long talk with Ben. .... Also intends to make it even more clear that if they play that card [backing out of the purchase agreement on Merrill Lynch] and they need assistance, management is gone."

Note the "and they need assistance" part of the e-mail. Is this a threat to remove Ken Lewis? It looks like a statement from Bernanke that if BoA does not cooperate in carrying through on its agreement, then Bernanke will not help him in the future if he needs it.

That seems a bit far from a threat to remove Lewis. It is simply a statement that if Lewis doesn't cooperate with the Fed, then Bernanke will not come to his assistance if he needs it.

Given the large list of questionable actions in the various bailouts, this one doesn't seem to be worth a lot of time.

--Dean Baker

Posted by Dean Baker on June 26, 2009 8:15 AM