Investigators say Fed threatened bank CEO

[Shapecity]

WASHINGTON (AP) -- The Federal Reserve threatened to force the ouster of Bank of America CEO Kenneth Lewis if he didn't follow through with plans to buy Merrill Lynch & Co., Republicans said Wednesday after reviewing internal documents.

Republicans also said there was evidence that the government tried to restrict information related to the merger from being publicly released.

However, none of the documents showed that the government explicitly instructed Bank of America to hide Merrill Lynch's losses from shareholders, they said.

The House Oversight and Government Reform Committee is investigating claims that top government officials, including then-Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke, urged Lewis to go through with the acquisition and not disclose to shareholders the details of Merrill Lynch's deteriorating financial state.

Lewis was scheduled to testify on Thursday before the panel, which is chaired by Rep. Edolphus Towns, D-N.Y.

Bank of America has received $45 billion from the government's $700 billion Troubled Asset Relief Program. As part of that money, the bank received $20 billion in January after Lewis requested it to help offset mounting losses at Merrill Lynch.

According to an internal memo prepared by the committee's Republican staff, Paulson and Bernanke "put a gun to the head" of Lewis and Bank of America's board of directors to force the merger even though Lewis "felt it was his duty to his shareholders to try his luck in the legal system and back out of the deal."

As proof, Republicans cite several documents including an e-mail by an employee at the Richmond Federal Reserve who said Bernake had made it clear that if Bank of America backed out and needed financial assistance, "management is gone."

Just a few weeks after the deal was completed, Bank of America's fourth-quarter earnings report showed the hit its balance sheet took on the Merrill Lynch transaction, making Lewis the target of shareholder anger.

In January, Bank of America reported a $2.39 billion fourth-quarter loss and Merrill Lynch disclosed a loss of more than $15 billion.

Source: Yahoo Sports

Now what?

 

[PapaG]

I find it odd that the same people who said Bush trampled the Constitution stand silent now. The Obama administration reminds me of Al Capone in some ways.

What's next? A horse head in this guy's bed?

 

[Minstrel]

What's next? A horse head in this guy's bed?

Unlikely. Animal rights activists wouldn't like that at all.

 

[RR7]

What exactly does this have to do with the Obama administration, though? Paulson was involved. Pretty certain Obama didn't nominate him. Care to enlighten?

 

[BTOWN_HUSTLA]

you know the new CEO of GM has no automotive industry experience whatsoever. CHANGE!

 

[barfo]

That darn Obama, corrupting the Bush administration.

barfo

 

[barfo]

you know the new CEO of GM has no automotive industry experience whatsoever. CHANGE!

That's right. Except for his 25 years of experience working for GM, he has no automotive industry experience whatsoever.

barfo

 

[BTOWN_HUSTLA]

oh, i meant chairman!

http://www.bizjournals.com/denver/stories/2009/06/08/daily52.html

I forgot about when Obama fired the last CEO.

 

[Denny Crane]

That's right. Except for his 25 years of experience working for GM, he has no automotive industry experience whatsoever.

barfo

http://www.bloomberg.com/apps/news?pid=20601109&sid=aQ._YJhEj_Jo

Whitacre Vows to ‘Learn About Cars’ as GM Chairman (Update1)

June 10 (Bloomberg) -- Edward E. Whitacre Jr. built AT&T Inc. into the biggest U.S. provider of telephone service over a 43-year-career. By his own admission, he becomes chairman of General Motors Corp. knowing nothing about the auto industry.

The 6-foot-4-inch Texan nicknamed “Big Ed” said steering the nation’s largest automaker after bankruptcy is “a public service.” People who know him say he can meet GM’s need for the type of transformation he orchestrated at Dallas-based AT&T.

“I don’t know anything about cars,” Whitacre, 67, said yesterday in an interview after his appointment. “A business is a business, and I think I can learn about cars. I’m not that old, and I think the business principles are the same.”

Whitacre’s selection bucks more than a half-century of tradition at GM, where the only non-executives to lead the board since 1937 were interim Chairman Kent Kresa and John Smale, who held the job from 1992 through 1995. Whitacre will take the post when Detroit-based GM exits Chapter 11, perhaps by Aug. 31.

The White House said Ford Motor Co. Chief Executive Officer Alan Mulally’s move from planemaker Boeing Co. shows that success doesn’t hinge on automotive experience. Ford is the only major U.S. automaker to avoid bankruptcy.

“What was required was somebody with savvy, big-business experience that could take a company, change its management culture, make some of those tough decisions to put it on that path toward viability,” Press Secretary Robert Gibbs told reporters at a briefing today.

‘Good Choice’

A bachelor’s degree in industrial engineering and record in shaping a “monolithic” AT&T into a diversified enterprise make Whitacre “a good choice” for GM, said Jim Hall, principal of 2953 Analytics auto-consulting firm in Birmingham, Michigan.

“He was one of the guys who helped create a new AT&T that wasn’t so dependent on land-line phone service,” said Hall, a former GM engineer. “There’s a parallel with General Motors. GM is not now about just making cars. It’s about re-creating itself as a 21st-century car company. They have to have somebody at the top that understands they have to make a new GM.”

The U.S. Treasury, which is backing GM’s restructuring with about $65 billion, reached out “some weeks ago,” Whitacre said, enticing him out of retirement to help oversee a company that has lost almost $88 billion since 2004.

Talking With Rattner

“Lots of conversations” followed with Steven Rattner, the Wall Street dealmaker running President Barack Obama’s car task force, said Whitacre, adding that Treasury’s message was: “We need your help. It’s a great company. You could be a lot of assistance to GM.”

In addition to Kresa, the automaker’s new, 13-member board will include five holdovers -- CEO Fritz Henderson and directors Philip A. Laskawy, Kathryn V. Marinello, Erroll B. Davis Jr. and E. Neville Isdell. Six others will retire, including all four who were appointed in the 1990s.

 

[Denny Crane]

And FWIW, AT&T was sold for scraps during the Clinton years (dot bomb bubble burst).

The mobile business was bought by Cingular who later took on the name AT&T.

There was no turnaround there.

 

[BTOWN_HUSTLA]

I think you're thinking of AT&T wireless (was that with Broadcom?)

 

[BTOWN_HUSTLA]

i remember AT&T was a pretty fucked little telecom in the 1990s though

 

[Denny Crane]

http://en.wikipedia.org/wiki/AT&T_Mobility

AT&T Mobility LLC is the wholly owned wireless subsidiary of AT&T Inc. AT&T Mobility, headquartered in Atlanta, Georgia,[2] is the second largest mobile phone company, in terms of number of subscribers, under Verizon Wireless. AT&T Mobility has approximately 78.2 million subscribers as of the first quarter 2009.

Formerly a joint venture between SBC Communications and BellSouth, Cingular Wireless soon acquired the old AT&T Wireless; SBC later acquired the original AT&T and re-branded as "the new AT&T". Cingular became wholly-owned by the new AT&T in December 2006 as a result of AT&T's acquisition of BellSouth.

In January 2007, Cingular confirmed it would rebrand itself under the AT&T moniker. The corporate name change occurred immediately, although, for regulatory and brand-awareness reasons, both brands were used in the wireless unit's signage and advertising during a transition period.[3] The transition concluded in late June, just prior to the rollout of the Apple iPhone.

 

[barfo]

oh, i meant chairman!

http://www.bizjournals.com/denver/stories/2009/06/08/daily52.html

It's pretty typical for board members to not come from the industry.

Whether that's a good thing or not can certainly be debated - but it isn't something Obama invented. GM's old board had 12 people, apparently none of them from the auto industry except the GM CEO.

barfo

 

[Denny Crane]

It's pretty typical for board members to not come from the industry.

Whether that's a good thing or not can certainly be debated - but it isn't something Obama invented. GM's old board had 12 people, none of them from the auto industry except the GM CEO.

barfo

This is the chairman, not a regular board member, and he's being touted as the guy who'll turn GM around.

 

[barfo]

This is the chairman, not a regular board member, and he's being touted as the guy who'll turn GM around.

He's not the executive chairman, so he's not going to be the guy who turns GM around, unless he hires the guy who turns GM around. There isn't much difference between chairman and board member in most cases.

barfo

 

[Denny Crane]

He's not the executive chairman, so he's not going to be the guy who turns GM around, unless he hires the guy who turns GM around. There isn't much difference between chairman and board member in most cases.

barfo

What's the point of making him Chairman? His specialty is acquisitions.

And there is a huge difference between chairman and a regular board member; the same difference between speaker of the house and representative from Wyoming. They both control the agenda (what gets brought up for votes).

Ironic that Obama picks a guy who got a $150M+ severance package for the job while talking about excessive executive compensation all the time.

 

[barfo]

What's the point of making him Chairman? His specialty is acquisitions.

Someone has to do it. And a background in acquisitions isn't entirely inappropriate.

And there is a huge difference between chairman and a regular board member; the same difference between speaker of the house and representative from Wyoming.

No, that's a completely bogus comparison. There's a big difference between being speaker of the House (435 members) and chairman of a corporate board (of 13 members in this case). A much closer comparison would be the chief justice of the supreme court vs. a regular member of the supreme court.

They both control the agenda (what gets brought up for votes).

I don't think that's a very accurate portrait. That might happen if the board is completely at odds with each other, I suppose, but most boards don't actually do much besides (a) provide advice to the CEO; (b) rubber stamp his decisions; and (c) fire him when it turns out they shouldn't have rubber stamped one of his decisions.

barfo

 

[Idog1976]

I find it odd that the same people who said Bush trampled the Constitution stand silent now. The Obama administration reminds me of Al Capone in some ways.

What's next? A horse head in this guy's bed?

Right out of the gate I want to say I don't like Obama and I didn't vote for him, I voted third party. I'm pretty sure the BOA Merril Lynch deal happened under the Bush Admin watch. Regardless, the FED is NOT part of the US government. It is neither Federal nor a reserve. Look in your phone book. In the government section you will not find the FED. However, in the private business section you will find your local FED branch (in my case the San Francisco FED) right next to Federal Express a private business.

The Federal reserve is in my estimation the current biggest threat to our sovereignty and to our economy. It must be dissolved or at a minimum reigned in. Their gross exercise of power over the past few years should send shivers down the spines of Republicans and Democrats both. Independents and Greenies as well if that is your flavor.

more to come...

 

[Idog1976]

I'm pretty sure the BOA Merril Lynch deal happened under the Bush Admin watch. Regardless, the FED is NOT part of the US government. It is neither Federal nor a reserve. Look in your phone book. In the government section you will not find the FED. However, in the private business section you will find your local FED branch (in my case the San Francisco FED) right next to Federal Express a private business.

The Federal reserve is in my estimation the current biggest threat to our sovereignty and to our economy. It must be dissolved or at a minimum reigned in. Their gross exercise of power over the past few years should send shivers down the spines of Republicans and Democrats both. Independents and Greenies as well if that is your flavor.

more to come...

Some rather staggering videos on the Federal Reserve. All of elected representatives questioning aspects of the Reserve.

[video=youtube;mO3GpzWfppo]"]

Now I dont' necessarily agree with everyone in this video. But there is excellent information from Ron Paul (R) and Dennis Kucinich (D).

[video=youtube;bdR1kpO9sc8]"]

 

[uosean]

I'm going to also point out that the US income tax on SALARIES AND WAGES is not a legal tax under our constitution. Its only enforced (by jail time and other penalties). Again. . . the federal income tax that the average US citizen pays is ILLEGAL under our constitution.

We pay that particular tax to pay penny per penny the interest rate the Federal reserve charges the US government. This should be mind blowing to all of us!!!!!

The US government can print it's own money BUT DOESN'T and has to pay TRILLIONS of dollars to a Federal reserve bank that charges the government in it's tax paying citizen interest on currency that never existed until they printed it. MIND EFFING BLOWING!!!!

Let me explain it this way. If I made a legal printing press and printed say $1000 (with the permission of the US gov.) and lent it to you. You would have to pay that $1000 dollars to me in return with interest of say like $50. Now I made $50 (not $1050) out of NOTHING. The $1000 can now be shredded and the net effect of this is a deficit in the system thus our out of control federal debt.

Think about that $1000 out into the system, $1050 taken out of the system. . . this can ONLY lead to consumer and government DEBT. The central banking systems of all the developed nations need to be removed or we will all face the loss of sovereignty of our nations.

 

[barfo]

I'm going to also point out that the US income tax on SALARIES AND WAGES is not a legal tax under our constitution.

I'm going to point out the 16th amendment to the constitution.

barfo

 

[BrianFromWA]

I'm going to point out the 16th amendment to the constitution.

barfo

It doesn't happen terribly often, but I'm in barfo's corner on this point.

 

[barfo]

It doesn't happen terribly often, but I'm in barfo's corner on this point.

Whoo hoo! I'm putting this one in my scrapbook.

barfo

 

[RR7]

I find it odd that the same people who said Bush trampled the Constitution stand silent now. The Obama administration reminds me of Al Capone in some ways.

What's next? A horse head in this guy's bed?

So seeing as Obama wasn't president at the time all of this went down, would you say the Bush administration reminds you of Al Capone in some ways? Or is that a one way street?

 

[Stepping Razor]

The Fed is, by design, not supposed to be dependent on the Executive Branch. So I don't think it's really fair to use the Fed's actions as a cudgel with which to beat either the Bush or Obama administrations.

That said, I find the Fed's actions through this whole sequence of events to be quite concerning. Between Bernanke/Paulson/Geithner (both Treasury Secretaries seemingly following the Fed rather than leading), spanning both presidential administrations, these guys seem to have been undertaking a series of extremely radical policies, without much transparency or accountability, via dubious means. Forcing private companies to take actions that may be detrimental to their own interests (although perhaps not detrimental to the interests of their CEOs) is ridiculous.

SR

 

[uosean]

I'm going to point out the 16th amendment to the constitution.

barfo

Just as a side note Barfo I'm quite a big fan of yours as well. Your comments always have me rolling on the floor laughing.

Now back to the arguement. . . I know about the 16th amendment but as far as I'm aware all amendments to the constitution must be ratified (approved/authorized/sanctioned) by 3/4 of the States. This is per article V of the US constitution.

At the time there were 48 states and 36 were needed to ratify the ammendment. 38 is the "official count" but if you dig deeper you'll find that they pulled a 2000-election-Florida-hanging-chad-style-fraud as fewer than 20 states can be found to have officially voted to ratify it.

Here's a link to an argument about it and there are many many more.

http://www.givemeliberty.org/features/taxes/notratified.htm

Amendment 16 was not (legally) ratified and therefore shouldn't be enforced.

 

[barfo]

Just as a side note Barfo I'm quite a big fan of yours as well. Your comments always have me rolling on the floor laughing.

Well... great!

Now back to the arguement. . . I know about the 16th amendment but as far as I'm aware all amendments to the constitution must be ratified (approved/authorized/sanctioned) by 3/4 of the States. This is per article V of the US constitution.

At the time there were 48 states and 36 were needed to ratify the ammendment. 38 is the "official count" but if you dig deeper you'll find that they pulled a 2000-election-Florida-hanging-chad-style-fraud as fewer than 20 states can be found to have officially voted to ratify it.

Here's a link to an argument about it and there are many many more.

http://www.givemeliberty.org/features/taxes/notratified.htm

Amendment 16 was not (legally) ratified and therefore shouldn't be enforced.

I knew you knew about the 16th amendment, I just wanted to hear the argument against it without having to google it. I'm lazy that way.

Maybe there was some dirty business in ratifying it, I don't know, but, like the 2000 election, what's done is done. The courts have upheld numerous challenges to the tax. It's not going to go away because of something that might have happened 100 years ago.

Might as well claim the US is really a British colony. The revolution was illegal after all.

barfo

 

[maxiep]

I have buddies of mine that worked on the valuation of ML for B of A. They were furnished incomplete and misleading information from ML on their financial status. It's tough to do M&A on a bank that has a larger and better M&A staff than yours, and ML did a really good job at hiding the depth of their MBS derivative exposure. It should be noted that these securities are pretty exotic and the bond math gets a little fuzzy at the edges, but eventually it comes out in the wash. Hank Paulson was one of the best M&A guys in the business in his Goldman days, and I'm not sure even he understood the kinds of liabilities B of A was going to assume.

Getting back to the issue at hand, the B of A acquisition of ML was pushed by the Treasury Secretary because ML going down would have crashed the system. So, unlike other acquisitions--which are a competitive process and result in a high bid which gives the shareholders of the acquired company some equity in exchange for their holdings--this one was like an arranged marriage where the husband only got a quick glance at the bride. Worse, she wearing a veil and the dowry was arranged based on that information. When the veil was taken off (i.e., the due diligence period), B of A saw warts and bad teeth. Based on the money B of A was getting from the Government, when they tried to back out, the government clearly influenced them to stay with it by a carrot (more gov't money) and a stick (pulling those funds).

The bottom line is that this wasn't a traditional acquisition and we're beginning to see the problems when the government gets involved in such private-to-private M&A work. Ken Lewis ultimately paid the price, but the expectation from B of A is that they'll eventually be made whole by the Government.

 

[Idog1976]

Well... great!



I knew you knew about the 16th amendment, I just wanted to hear the argument against it without having to google it. I'm lazy that way.

Maybe there was some dirty business in ratifying it, I don't know, but, like the 2000 election, what's done is done. The courts have upheld numerous challenges to the tax. It's not going to go away because of something that might have happened 100 years ago.

Might as well claim the US is really a British colony. The revolution was illegal after all.

barfo

That's a slippery slope. We either have a nation built on the constitution or we just make stuff up as we go along. It is the very basis of our legal framework and without it we are a rudderless ship. Either amendments are passed legally or they are not amendments period.

A judge can rule however they want but to avoid activist judges of either stripe we must look to the constitution for guidance. If the 16th amendment was not passed (it's hard for me to say but it seems suspect at best) then it should not be enforced. If it's so wonderful and universally agreed upon we might as well do the formality of re-ratifying it to be sure that it passed. It's the only amendment I know of where there is some question as to it's legality. Let's make it right or be done with it.

It's kind of silly anyways as our income tax laws seem to really only apply to lower tier rich and the middle class. Poor people and the very rich pay virtually nothing.