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Paulson Admits to Threatening Bank of America CEO Lewis Over Merrill Lynch Merger

16 July 2009 No Comment

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BY: NCViking

It looks like the government’s intrusion into the private sector is not limited to the tentacles of the Obama Administration. Former treasury Secretary Hank Paulson admitted that he told Bank of America CEO Ken Lewis that the Fed would oust him and the board of directors if they did not go along with a forced merger with Merrill Lynch. Lewis had discovered losses were greater than previously known and considered pulling out of the deal. He has long maintained that he went along with the merger under direct threat — it appears Lewis has been telling the truth.

Paulson:

Some have suggested that there was something inappropriate about my conversation of December 21st with Mr. Lewis in which I mentioned the possibility that the Federal Reserve could remove management and the board of Bank of America if the bank invoked the MAC clause. I believe my remarks to Mr. Lewis were appropriate. I explained to him that the government was supportive of Bank of America, but that it felt very strongly that if Bank of America exercised the MAC clause, such an action would show a colossal lack of judgment and would jeopardize Bank of America, Merrill Lynch, and the financial system. I further explained to him that, under such circumstances, the Federal Reserve could exercise its authority to remove management and the board of Bank of America … I was expressing what I am confident was the strong opinion of the Federal Reserve, namely, that exercise of the MAC clause was not a legally viable option; that it threatened significant harm to Bank of America and to the financial system; and that it would raise serious questions about the competence and judgment of Bank of America’s management and board.

So its a colossal lack of judgment to look out for the best interest of your shareholders? In what universe?! That’s like saying you were wrong to not drink a beer that you later found out was actually piss. Then being forced to drink the poison substance anyway under eminent threat.

Here is a take from Forbes that sheds light on the deceptiveness of how this all went down:

None of the details revealed by Lewis’ testimony to Cuomo’s office–all substantive matters that would have been of keen importance to shareholders of Merrill Lynch and Bank of America–were ever made public before the deal went through on Dec. 31. That is a shocking violation of the requirement to inform shareholders of any material matters that could impact their vote or holding of shares in either company. This nondisclosure of market sensitive information means all the trading between Dec. 15 and April 22–tens of millions of shares of the largest U.S. bank–was executed on the basis of withheld information. This is a shocking violation of 75 years of securities regulation.

Incredibly, the SEC was never informed of any of this: that Merrill was about to report a huge $15 billion loss, that Lewis wanted to kill the deal, that Paulson told Lewis that Bernanke had instructed him to fire Lewis and dismantle his entire board if he refused to go through with the merger. It’s not exactly clear what authority Paulson and Bernanke were going to use to replace Lewis and his board–powers they might assume in a pending systemic breakdown?

“Notably, during Bank of America’s important communications with federal banking officials in late December 2008, the lone federal agency charged with protecting investor interests, the Securities and Exchange Commission, appears to have been kept in the dark,” states Cuomo’s letter to congressional leaders. “Indeed, Secretary Paulson informed this office that he did not keep the SEC chairman in the loop during the discussions and negotiations with Bank of America in December 2008.” In other words, Paulson’s disdain for SEC Chairman Christopher Cox meant that the Treasury was operating in an autonomous, somewhat high-handed fashion.

So if the Fed can threaten private companies into doing their cloak and dagger bidding, shouldn’t a Congressional audit be in order (bill HR1207)? Well, if this happens the Fed has threatened the American People that it will raise interest rates to punish the economy. Here is Judge Andrew Napolitano on Fox’s Freedom Watch talking with Ron Paul about this.

The Fed is completely out of control!

Wait a minute, don’t we have an Inspector General for the Federal Reserve to provide oversight? Watch this video and you will realize that the guards are sound asleep at the desk here.