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Paulson Says He Threatened Bank Chief Executive
WASHINGTON - Former Treasury Secretary Henry Paulson says he was justified last year in suggesting that Bank of America Corp.'s chief executive could lose his job if the bank backed out on plans to buy troubled Merrill Lynch.
Former U.S. Treasury Secretary Henry Paulson responds to charges of misleading the Congress during a testimony before a House of Representatives Oversight and Government Reform Committee on Capitol Hill in Washington, July 16, 2009. Paulson said that he acted appropriately in warning Bank of America Chief Executive Kenneth Lewis that top executives could be ousted if they walked away from a merger with Merrill Lynch. (REUTERS/Hyungwon Kang) His admission, included in written testimony for a House hearing Thursday, comes as Congress debates the government's role in managing financial firms that accept billions of dollars in aid.
Bank of America Corp., which went through with the merger, ultimately accepted $45 billion in federal aid, including $20 billion to absorb the financial hit it took from acquiring Merrill Lynch & Co.
Rep. Darrell Issa of California, the top Republican on the House Oversight and Government Reform Committee, said Paulson's testimony makes clear that the government became too involved and misused its power.
"It is a threat to the foundations of our free society when government officials, acting in the midst of a crisis, use dire predictions of imminent disaster to justify their encroachment on our individual liberty and the rule of law," said Issa.
In prepared testimony, Paulson said he told Bank of America CEO Kenneth Lewis last year that reneging on his promise to purchase Merrill 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.
"By 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.
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 is gone."
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."
32 Comments so far
Show All"'. . . 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.'"
Preventing the exposure of the bank's shareholders to Merrill's disastrous financial condition was not a "reasonable legal basis" for pulling out of the deal?
I'm trying to understand what Goldman Sachs' interest in keeping Merrill afloat may have been. All of Paulson's baliout decisions (as well as those of Geithner and Summers) were driven by his loyalty to that firm.
Speaking of which, it's great to see Corzine - another GS alum - in trouble in New Jersey. There's a third-party opportunity if I've ever seen one.
q
In addition to promoting Goldman Sachs interest, the Dubya Regime, Obama Regime and Congress not only see nothing wrong with corporations becoming too big to fail, they enable and in some cases (like this one) orchestrate the creation and survival of ever larger corporations that are too big to fail, thereby exposing US taxpayers to ever larger bailouts.
We need to resurrect trustbuster Teddy Roosevelt so he can "walk softly and carry a big stick" to DC and beat these people over the head with it.
Paulson, a Goldman Sachs alum, along with Bernanke and all the rest of the Wall Street bankster/gangsters have openly pulled off the biggest criminal heist in world history. And now own the US Congress, says Illinois Senator Dick Durbin. Now when some homeless hungry person steals a loaf of bread, watch the long arms of the law adminster "justice". The common figure for the annual US gross domestic product is $13-14 trillion. And the Treasury and Federal Reserve have already shovelled an unaccounted-for $11-12 trillion to the banksters, in the too big to fail program in the last 10 months. Many lessons in recent years of the principle that the best way to rob is from the inside be it the banks, Pentagon contractors, health care industries, etc. All are essentially criminal operations by any reasonable standards.
I agree with you 100%. And so far we have allowed it. So how are we going to stop it? We have been advised to be ever vigilant. Right? Vigilant. Understand, yet? I suppose we could just vote ...
Rep. Issa sez: "It is a threat to the foundations of our free society when government officials ... use dire predictions of imminent disaster to justify their encroachment on our individual liberty and the rule of law."
***
Perhaps a greater threat to the "foundations of our free (sic) society" is that its citizens allow multinational cancers like Bank of America to be endowed with "individual liberty", freeing up any dipwad with vocal cords to spout this crap with a straight face.
The reason pissa doesn't understand rule of law is because he's never seen it applied to anyone he hangs with.
p.s. - this isn't meant as a defence of Gold in Sacks' liason to the administration; lazy, vacuous propaganda just pisses me off.
Perhaps Mr. Paulson would do the United States an enormous favor by committing suicide. I'm sure Bernie Madoff, John Thain or Richard Fuld can supply him with a large caliber gold plated pistol and ammunition.
Just a slight misunderstanding of who said what, when and where. The economy is still in a shambles. What if we had not bailed out the beggers? Would the economy really have collasped as Paulson predicted, or would it be in the same mess it still is? It appears that the beggers are doing just fine and getting ready to pass out more bonuses. If they are doing so great why aren't they REPAYING our money instead of rewarding each other on the perfect scam? Or, wasn't it the intention to ever repay? In other words an outright gift to the swindlers who created the meltdown?
After all, it is just money and has about as much value as the millions that got tossed around in Iraq and never were accounted for, just vanished into thin air. Perhaps the FED would like to print the same amount lavished on the banks and this time lavish it on those losing their jobs and their homes.
annabelle,
Please see my post above. These psychos think that THEY are the economy. With their private definitions for things we define very differently, they continue their obfuscation game. Paulson doesn't care about the real economy. He is a psychopath. He is intelligent, superficially charming and ruthlessly sociopathic.
Kudos to the photographer - truely an emblematic portrait. Hands shaping empty air, mouth spouting empty air, all is vanity. their words are but air
Never mind banks and armies and protection rackets. We have already given our hearts away.
'We are the hollow men, We are stuffed men, Headpieces filled with straw
ALAS'
What is new about the rotten and criminal behavior of these psychopathic existences who still believe that they are valuable humans?
Even Hitler thought nothing wrong with himself.
The growing public opinion of collective disgust will have an effect on these creatures. One way or the other.
“Collateral Damage” by E. P Heidner, part I and II.
>>> www.scribd.com/people/documents/2169400-ep-heidner <<<
shellbeach
Obama is trying to mediate between the two sides. First he must award his financial supporters...the big ones on Wall Street and elsewhere. But in reality, he should have planned on being a one term President and plowed straight ahead for average citizen, which is the other side.
Like raydelcamino's post!!! Right on point.
The "colossal lack of judgment" prize should be handed to Henry Paulson for dumping Merrill Lynch onto Bank of America instead of on Goldman Sachs.
I guess Paulson had too much to lose with all the stock he owns in Goldman. If this wasn't a clear case involving "conflict of interest", I don't know what the hell would be!
goebbels sez you are too funny! did you suffer some personal
misadventures in finance and realize how crazy these people
are or did this come naturally? i spent 6 unforgettable yrs.
with those nuts and came to understand that their mothers
should have drowned them in the bathtub when they were
babies and saved the world a whole lot of trouble!
the lack of feelings for their fellow man and their
rational for those things was beyond my capacity to even
begin to comprehend and i had to walk away before they
could do any real damage to my integrity!
I find the elite "for public consumption" vocabulary of Paulson fascinating; unthinkable, not reasonable, anyone, etc. This sounds a bit like Condobusha Rice's "no one could imagine" comment about 9/11. And lets not forget the boringly expected blab from the media about "unexpected and surprising" negative economic factors.
So let's translate:
Any one = Any multimillionaire.
American Public = All the people who work for wall street, the pentagon contractors or congressional lobbyists (I realize there is some repetion here).
unthinkable = None of your business. Don't talk about it or else!
not reasonable = If the elite wall street crooks have to take their lumps like the rubes do for the wild betting the elite wall street crooks engaged in.
Arogance = Never heard of it. Is that an Al Queda anti-american arab word or something?
Public Servant = A great joke for elite cocktail parties.
Humble = What the elite must appear to be when in the public eye.
We understand you Paulson. You had hundreds of millions in GS stock. You rigged it right so that by July of 2009 (right NOW) you'd become a billionaire. Yeah, we know. It's just the free market. It's only "reasonable" that with all that top talent, you and your friends would really rake it in. Isn't that your pal Rahm Emmanuel that says never let a good crises go to waste? Oh, you are such a sharp cookie, Hanky panky Paulson. Watch your back, pal.
Hank Paulson as Al Capone, with Paulson's 3-page threat to the Congress to save the hedge fund system or face total financial collapse---the metaphorical equivalent of a threat of another St. Valentine's Massacre.
An uncle of mine worked for BofA as a VP after a long banking career in New York. My first wife and I had dinner on him back in the early 60s at the Top of the Mark in San Francisco, and I could tell by how he spoke with the waiter that he was a regular. He was the most civilized man I have ever met. His son became a hedge-fund manager---president of a firm in California---and last autumn, as the economy was unraveling and he saw that he had no way to protect his investors, he did suicide in his home. The family is devastated. (As, no doubt, are his investors.)
To the extent this article is accurate---and I believe that in essence it is---were I high up in BofA (these days referred to in the media as BoA), I would be asking Management to initiate a full-blown RICO-statute investigation into Goldman-Sachs, the Fed, and the Treasury. I would be asking for FULL TRANSPARENCY.
Add in the Lehman Brothers hush-up and it has all the elements of a Chicago coup. We need to find out where our money is actually going. We need the federal bureaucracy to do its job. Where is Eric Holder???
Paulson used the heavy hand of government to subdue a competitor. In context, that is INEXCUSABLE.
(Admission: I have an IRRA with Merrill-Lynch, and it is treading water.)
__
Addendum. These millionaire/billionaire people really piss me off. It is a kaleidescope of the impossible trying to do the impossible. Democracy side-by-side with Fascism? Give me a break. It ain't gonna work. "Too big to Fail"? Rome was "too big to fail." So were several Chinese Dynasties.
-30-
It all kinda makes you sentimental for the Mafia. They had a code of honor. At least, when they were knee-capping people, they didn't pretend it was for the good of the economy.
Good point.
Not even the mafia would force someone to borrow from their loan sharks. We are being forced to borrow trillions to give to the banks. And we will be forced to repay it with interest. We are now paying over $450 BILLION DOLLARS YEARLY just to "service" these debts. And deficits from now on are going to run over a trillion dollars a year unless we the people get off our collective ass and do something about it. It will only be a few more years at this rate before it requires every tax dollar collected just to pay interest in the war debts and the giveaways to the banks. Don't forget to vote. That'll take care of everything.
Good Point EKATON,
And the really scary thing is, if I am not mistaken, that 450 billion dollar debt interest service payment was BEFORE the bank bailouts began. It's going to get unsustainable unless inflation is allowed to take off to "Kill" the excess debt. Of course inflation will kill all meaning of wealth (savings etc) but it will allow upside down homeowners to get back under control IF labor laws alow their wages to increase (fat chance of that.)
This is just like being on board an Air France AF447 Airbus. No matter what happens, it's going to be ugly and we are going to wind up falling into the water in small little pieces. Something more drastic than voting is in order here: something like torches and pitchforks....
TJ
"All tyranny needs to gain a foothold is for people of good conscience to remain silent." - Thomas Jefferson
"It's going to get unsustainable unless inflation is allowed to take off to "Kill" the excess debt."
I sincerely believe this is the plan, that a period of heavy if not hyper inflation is intentionally being engineered. Of course it will destroy savings and those on meager retirements are royally screwed unles they get substantial cost of living increases from the government for social security. And it is really going to annoy China, Japan and Saudi Arabia amongst other creditors. It ain't gonna be pretty. And the borrowing continues. Maybe another war would stimulate the economy (sarcasm). Be sure to vote (also sarcasm).
Sorry, I missed your sarcasm there,
Well the NeoCons are drumming up war again over those nasty "entitlements" that would already be gone completely if the Bushmonkey had gotten his hands on Social Security like he wanted.....
Where is one to hide? In physical Gold? In TIPS Bonds? The gov is so bad about "cooking" the CPI number now (no food or energy included on the "basket of commodities" selected from where? Salvation Army?) that both inflation protected securities and Social Security adjustments are completely crushed by real inflation. I've been sitting in Treasury Money Market in my 401K for a year because I don't know what to do..... which was closed to new transfers because too many of us are all hiding in there! I can't cash out for years under the new "interpretation" of the plan, so my money is being held hostage....
I'm completely stumped on what to do.... But staying in cash is suicidal. I guess I'll start wading into TIPS (gov bond "fund") but those may soon become worthless....
Major Dilemma. I guess I better get used to wearing palm fronds for clothing.....
TJ
"All tyranny needs to gain a foothold is for people of good conscience to remain silent." - Thomas Jefferson
I have to say I never really knew much about Paulson until the great 'crisis' and all the bailouts hit the news. But early in the crisis, I happened to see him on "This Week with George Stephanopoulos" where he made some pathetic attempt to justify why he wanted to bail out the foreign banks as well. He made some BS argument about how those banks have operations in the U.S., hire Americans, etc., and used the phrase "that's a distinction without a difference". I thought, WTF! Even if I didn't know much about a person at first, I can spot BS when I hear it, and I thought, 'who's side is he on, really?'. All the subsequent events and news only confirmed my initial impression. You can see this on YouTube:
http://www.youtube.com/watch?v=nHmY-awltgM
The part about bailing out foreign banks is at around 6:55 minutes into the video.
Prison is for the little people, apparently.
-TIA
It is all right because Paulson is a secret CIA agent, and he can take out anyone that is troublesome. There must be a Mission Impossible program that has this plot.
For almost a half minute, part of my brain was convinced that the accompanying photo of Henry Paulson was really that of Tor Johnson, the grade-Z actor who plays a bald hissing grasping ghoul in the grade-Z Bela Lugosi movie- BRIDE OF THE MONSTER.
Amazingly similar faces, yes.
'Movie' themes that're identical, absolutely.
So: was it all that crazy to be fooled?
'"It is a threat to the foundations of our free society when government officials, acting in the midst of a crisis, use dire predictions of imminent disaster to justify their encroachment on our individual liberty and the rule of law," said Issa.'
One might expect that from Darrel Issa. This one made his "fortune" selling the car alarms that tormented hundreds of millions of people for a couple of decades and prevented probably a handful of car thefts.
Flush with cash, Issa proceeded to buy his seat in the US House of Reps, and then, to outdo himself Issa bankrolled the Gray Davis recall after nobody less than Darth Viper spearheaded the energy deregulation that put California in crisis.
So it comes as no surprise that Darrel Issa spouts kaka about "individual liberty and the rule of law" when the issue regards theft of public funds for upward redistribution to behemoth robber baron corporations.
Just Look at that Red-faced Liar. Last lie from him last Oct, he was stuttering profusely since he probably couldn't even believe himself that Americans were so stupid they would let him steal billions in broad daylight. Now it looks like he's developed a new fear of jail and his skin has turned beat red.
And what's with the fingers in the air? Is he trying to hypnotize his audience the way Rummy used to do when he made the case for phony WMD's?
Everybody that bush picked for office is a monster. We will never get over the damage this Monopoly Mafia has done to our country.
TJ
"All tyranny needs to gain a foothold is for people of good conscience to remain silent." - Thomas Jefferson
Re ThomasJefferson... July 17th, 2009 6:28 am, who asks
"And what's with the fingers in the air?"
That's Paulson telling Congress "Each one is THIS big---and solid brass to boot."
If we are all so damn smart here, why don't we get in their faces and call a spade a spade?
Even though I voted for Obama, we need to make sure that the will of the people is realized. Obama needs to know that we have his back, or all is lost.
Official U.S. Government Extortion? It's time the dump the greenback.
Is Paulson too big to JAIL?