More Merrill/BAI, who cares?
Paulson says he pressured Bank of America CEO <div> <cite> By ANNE FLAHERTY, Associated Press Writer <span>Anne Flaherty, Associated Press Writer</span> </cite> <abbr title="2009-07-16T08:26:08-0700">16 mins ago<br><br></abbr></div><div id="darla-ad__LREC"><br></div> <p>WASHINGTON – Former <span id="lw_1247757979_0">Treasury Secretary Henry Paulson</span> testified on Thursday that he pressured <span id="lw_1247757979_1">Bank of America Corp</span>. last year to go through with its plans to buy <span id="lw_1247757979_2">Merrill Lynch</span> but didn't tell the bank's chief to hide potential losses from shareholders.</p> <p>Paulson acknowledged that he warned the bank's CEO, <span id="lw_1247757979_3">Kenneth Lewis</span>,
that Lewis could lose his job if he dropped the deal. Paulson also said
he pledged government aid to the bank but declined to put that promise
in writing because the details would have been vague and would have to
be disclosed publicly by the Treasury Department.
Paulson said negotiations were kept private to protect investors.
“We didn’t want to overly scare people and make it worse,” Paulson told the House Oversight and Government Reform panel.
testimony comes as Congress debates whether to expand the Federal
Reserve’s power to monitor large, influential institutions like Bank of America.
Rep. Edolphus Towns of New York,
the Democratic chairman of the House Oversight and Government Reform
Committee, said he believes Lewis squeezed money out of the government
by threatening to back out on the deal. The government ultimately gave
$20 billion to the bank to blunt losses tied to the acquisition.
“All of this happened against a backdrop of unchecked government power, with no transparency or accountability,” Towns said.
testimony to the committee, Paulson said he told Lewis last year that
reneging on his promise to purchase Merrill Lynch would show a
"colossal lack of judgment."
Paulson said that “under such circumstances,” the Federal Reserve would be justified in removing management at the bank.
referring to the Federal Reserve’s supervisory powers, I intended to
deliver a strong message reinforcing the view that had been
consistently expressed by the Federal Reserve, as Bank of America’s
regulator, and shared by the Treasury, that it would be unthinkable for
Bank of America to take this destructive action for which there was no
reasonable legal basis and which would show a lack of judgment,"
Paulson said he believed his remarks to Lewis were "appropriate."
Federal Reserve Chairman Ben Bernanke
has denied threatening to oust Lewis and said he never told anyone else
to, either. But another Fed official suggested otherwise in an e-mail
obtained by House investigators.
Jeffrey Lacker, president of the Richmond Federal Reserve Bank,
said in a December 2008 e-mail that Bernanke had planned to make “even
more clear” that if Bank of America backed out on the deal, "management
Paulson said Bernanke never
asked him to relay the message. But, he added, he believed he was
expressing the Fed’s opinion that dropping the deal “would raise
serious questions about the competence and judgment of Bank of
America’s management and board.”
"Lack of judgement"? Seems to me the lack of judgement was purchasing ML in the first place. I think it was wise that he wanted out. I am not happy that the govmnt forced this deal to go through. Full disclosure: I am out of a BAI job that I probably would still have had this ML purchase never happened and I am disgruntled. However, I am now indie and happy.
“Lack of judgement”? Seems to me the lack of judgement was purchasing
ML in the first place. I think it was wise that he wanted out. I am
not happy that the govmnt forced this deal to go through. Full
disclosure: I am out of a BAI job that I probably would still have had
this ML purchase never happened and I am disgruntled. However, I am now
indie and happy.
EXMLBAI - If you weren’t making it as a bank broker to begin with how in the hell did you expect to be successful in the more demanding environment BAI was evolving to even before the acquisition? Maybe independence is the right place for you. Did you go to Primerica?
I owned ML stock, so I am glad the deal went through. Haha. If not, that stock would have been worthless.Thankfully, I had already sold half of my position at 65 and change...
Popeye, I was not a bank broker with BAI. I was in management at both firms. So I know all about this “demanding environment” of which you speak.
Management losing jobs is a blessing for this industry. With fees down and payouts cut I can think of nothing more sickening then 6 layers of management living high on the sweat of hardworking producers.