|
Former Treasury
Secretary Hank Paulson is attempting to defend the indefensible: himself. He
even claims to have "saved this nation from great peril." Please
consider his preposterous claims as outlined in Paulson defends his
response to economic crisis
.
Defending the
government's handling of the economic crisis last year, former Treasury
Secretary Henry Paulson said Wednesday that the Bush administration's
responses were not perfect but "saved this nation from great
peril."
"Many more Americans would be without their homes, their jobs, their
businesses, their savings and their way of life," he said in written
testimony prepared for a hearing Thursday.
"Our responses were not perfect ... But, having had the benefit of some
time to reflect, and to consider views expressed by others, I am confident
that our responses were substantially correct and they saved this nation from
great peril," Paulson wrote.
Paulson also defended himself against allegations that he and Federal Reserve
Chairman Ben Bernanke pressured Bank of America Corp. into acquiring Merrill
Lynch, despite mounting financial losses at Merrill that were ultimately
absorbed by Bank of America stockholders.
Bernanke has denied threatening to oust Bank of America CEO Kenneth Lewis if
he abandoned the takeover.
Paulson said he told Lewis that reneging on the promise to purchase Merrill
would show "a colossal lack of judgment." He then pointed out to
Lewis that the Fed could remove management at the bank if it saw fit, he
said.
"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 Belongs In
Prison
Paulson said he believed his remarks to Lewis were "appropriate." I
say Paulson belongs in prison. Whether of not more American would be without
their homes had not Paulson pressured Lewis and Bank of America is debatable.
More importantly, the result is irrelevant. Threatening to fire Lewis and the
board of Bank of America is coercion, and coercion is a
crime. The end does not justify the means for Nixon, Paulson, Bush, or FDR
(the latter for confiscating gold and numerous other illegal transgressions).
Regardless of his reasons or the result (personally I think Paulson made
matters far worse), the important point is Hank Paulson broke the law, and so
did Lewis and Bernanke.
I spelled this out nicely on April 24, 2009 in Let the Criminal
Indictments Begin: Paulson, Bernanke, Lewis.
The case is ironclad now because Paulson has admitted threatening Lewis and
Bank of America as the following article shows.
Paulson Bent to Demands of Bank CEO
Please consider Lawmakers say Paulson bent to demands of bank CEO.
Lawmakers accused former
Treasury Secretary Henry Paulson on Thursday of bending to the demands of a
major bank and keeping negotiations of a hefty bailout secret in his rush to
stabilize financial markets last year.
Paulson, testifying for the first time since leaving office in January after
putting in place a $700 billion bank bailout program, was defiant in his
response and admitted no wrongdoing.
In one particularly testy exchange, Democratic Rep. Marcy Kaptur suggested
that Paulson -- the former head of Goldman Sachs -- needed to visit her home
state of Ohio to see how bad the economy really is.
"I know how terrible it is, I'm telling you it would have been worse"
had the government not intervened, Paulson said. Kaptur, who voted against
the bailout program, responded: "If that's your best argument, that's
not good enough."
Paulson acknowledged in his testimony that
he pressured Bank of America CEO Kenneth Lewis to proceed with the deal
despite Merrill's mounting financial losses. Paulson said he warned Lewis
that Lewis might lose his job if he dropped the deal or tried to renegotiate
because doing so would exhibit a "colossal lack of judgment."
At one point during the discussions, Paulson pledged government aid to help
Bank of America absorb some of the losses from acquiring Merrill. Paulson
said he declined to put that promise in writing because the details would
have been vague and would have had to be disclosed publicly by the Treasury
Department.
Rep. Edolphus Towns of New York, the panel's Democratic chairman, said
Paulson was all too willing to promise Lewis money after Lewis threatened to
back out on the deal. "All of this happened against a backdrop of
unchecked government power, with no transparency or accountability,"
Towns said.
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
the House panel.
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."
Selective Memory Loss
Threatening CEO Lewis is coercion, and pledging government aid to induce
Lewis to go ahead with a deal Lewis knew was wrong is arguably bribery. Where
are the indictments?
Bernanke is on the hook as well. Does anyone really believe Bernanke when he
told Congress "He does not remember that part of the conversation with
Mr. Lacker."
Here's the deal: People conveniently fail to remember things to prevent
perjury.
For more details please see Bernanke Suffers
From Selective Memory Loss; Paulson Calls Bank of America "Turd in the
Punchbowl".
Rep. Alan Grayson on Hank Paulson
Please consider the following video footage of Alan Grayson on MSNBC with
Dylan Ratigan and Eliot Spitzer discussing Hank Paulson and the bailouts.
Grayson said about former Treasury Secretary and former Goldman Sachs CEO
Hank Paulson who presided over the bailout while owning hundreds of millions
in Goldman stock:
"Hank Paulson never should have had that job in the first place. He had
a $700 million conflict of interest and everything that he did while he was
Treasury Secretary, every single thing that he did, has one explanation -
what's good for Hank Paulson?"
Grayson also discusses the Federal Reserve's secret trillion dollar bailout,
Ron Paul, and why transparency is necessary.
Coercion,
Bribery, Conflicts of Interest
Not that this is any big secret, but add Conflicts of Interest to the charges
against Paulson. We are now up to Coercion, Bribery, and Conflicts of
Interest. Anyone have any other charges to level against Paulson?
Secret Sanctions on Bank of America and Citigroup
By now, nothing the Fed or Treasury does should be surprising, including
secret sanctions. Please consider U.S. Regulators to BofA: Obey or Else.
Bank of America Corp. is operating under a secret
regulatory sanction that requires it to overhaul its board and address
perceived problems with risk and liquidity management, according to people
familiar with the situation.
Rarely disclosed publicly, the so-called memorandum of understanding gives
banks a chance to work out their problems without the glare of outside
attention. Financial institutions that fail to address deficiencies can be
slapped with harsher penalties that include a publicly announced
cease-and-desist order.
The order was imposed in early May, shortly after shareholders of the
Charlotte, N.C., bank stripped Chief Executive Kenneth Lewis of his duties as
chairman. Bank of America faces a series of deadlines, some at the end of
July and others in August, these people said.
The MOU is the most serious procedural action taken against Bank of America
by federal regulators since the financial crisis erupted.
Citigroup Inc. has been operating since last year under a similar order with
the Office of the Comptroller of the Currency, according to people familiar
with the matter. The company recently has been negotiating with the Federal
Deposit Insurance Corp. about entering into a similar agreement with that
agency, these people say.
Tensions between Bank of America and government officials have been building
for several months, most notably a warning to Mr. Lewis by then-Treasury
Secretary Henry Paulson that the bank's management could be pushed out if it
abandoned the deal to acquire securities firm Merrill Lynch & Co.,
staggered at the time by massive losses.
In late January, the Federal Reserve and
Office of the Comptroller of the Currency downgraded their overall ratings of
the bank to "fair" from "satisfactory," according to
people familiar with the matter. In a letter that was reviewed by The Wall
Street Journal, the Fed criticized Bank of America's management and directors
for being "overly optimistic" about risk and capital. The bank's
capital position "was vulnerable" even before the Merrill deal, the
Fed concluded, citing "acquisition activity" that included last
year's takeover of mortgage lender Countrywide Financial Corp.
"Management has taken on significant
risk, perhaps more than anticipated at the time the acquisition was
proposed," a Fed official wrote in the letter, which accompanied the
ratings downgrade and was sent days after the government agreed to $20
billion in aid to keep the Merrill deal on track. As a result, "more
than normal supervisory attention will be required for the foreseeable
future."
The MOU surprised some Bank of America executives who hadn't expected federal
regulators to issue such a formal rebuke. The bank responded swiftly, with
six directors resigning since May 26. The departures include O. Temple Sloan
Jr., Bank of America's lead independent director, and Jackie Ward, chairman
of the board's asset-quality committee.
Ultimate Irony For Lewis
The ultimate Irony for Lewis is that he broke the law to save his and the
board's jobs by doing what Paulson asked. Then after the Merrill Lynch deal
went through, the Fed and the Office of the Comptroller of the Currency
rebuked Lewis and Bank of America for taking on too much risk!
This is hardball at its very finest.
I propose Bernanke, Lewis, and Paulson all share the same prison cell for the
next 10 years or so. I will even throw in a ball and a bat so they can
continue playing their games.
Mish
GlobalEconomicAnalysis.blogspot.com
| |