Did Bernanke & Paulson Strong-Armed B of A’s Lewis For Merrill’s Deal?
By Gilbert Mercier, NEWS JUNKIE POST
On Thursday, the Committee on Oversight & Government Reform continued its investigation of the Bank of America/ Merrill Lynch merger with a hearing untitled: “Bank of America & Merrill Lynch: How did a private deal turn into a Federal bail out?”
After Bank of America’s Ken Lewis’ hearing two weeks ago, it was the turn of Fed Chairman Bernanke to be grilled by Congress. The merger and the role of Fed Bernanke & former Treasury Secretary Paulson was at the very core of the financial meltdown in the end of 2008.
In his opening statement, Chairman Kucinich did not mince his words:
“ Contrary to a popularly held belief that the government went too far in the Bank of America/ Merrill Lynch deal, our investigation reveals that what is remarkable is what the government DID NOT DO. In two meetings, in December 2008, Bank of America’s Ken Lewis asserted that he had only recently become aware of the deteriorating situation at Merrill…..The Fed found, in contradiction to Lewis’s representations, that Bank of America failed to do adequate due diligence in acquiring Merrill. The Fed found that Bank of America had known about accelerating losses at Merrill since mid-November….Yet, in spite of the Fed’s doubts about Lewis’s management of Bank of America, the Fed’s leadership orchestrated an aid package that attached no meaningful conditions for the money.”
In his own opening statement Fed Chairman Bernanke said:
” On September 15 2008, Bank of America announced an agreement to acquire Merrill Lynch, I did not play a role in arranging the transaction and no Federal reserve assistance was promised or provided in connection with that agreement.”
This is in contradiction with what Bank of America’s Lewis said in previous hearings where he gave clear indications that he was coerced into the deal by Bernanke and Paulson. The questioning got a bit tasty between the committee and the Fed Chairman when he claimed he could not re-call various points of the deal. Either, the Fed Chairman has alarming memory losses or he does not want to expose himself to perjury.
Next to face Congress will be former Treasury Secretary Paulson, so except more fireworks. The Committee still has a long way to go in order to get to the bottom of this.
Was the deal between Bank of America and Merrill a private arrangement between two consenting parties, or a shot gun wedding under the hospice of Bernanke and Paulson?
In any case, President Obama stated yesterday that he had “full confidence” in Fed Chairman Bernanke. Wall Street agreed with the president and liked Bernanke’s “performance” in front of Congress.