Government Abandons Lying; Resorts To Pure Naked Threats

I’m at a loss. I don’t know what world can justify this, and can only hope that my readers will be just as appalled as I am, because I have nothing to add.

WASHINGTON (AP) — Former Treasury Secretary Henry Paulson testified on Thursday that he pressured Bank of America Corp. last year to go through with its plans to buy Merrill Lynch but didn’t tell the bank’s chief to hide potential losses from shareholders.

Paulson acknowledged that he warned the bank’s CEO, Kenneth Lewis, that Lewis could lose his job if he dropped the deal. Paulson also said he pledged government aid to the bank but declined to put that promise in writing because the details would have been vague and would have to be disclosed publicly by the Treasury Department.

In testimony to the committee, Paulson said he told Lewis last year that reneging on his promise to purchase Merrill Lynch 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.”

I’ve previously covered this type of activity by Paulson & Bernanke here and here.

  • Jeff Molby

    I have a hard time being surprised or upset about things like this. When you start from the premise that certain bodies are in charge of regulating certain business, this stuff is the inevitable conclusion.

    I would instead spend my time building a laundry list of such examples to demonstrate that a market can’t simultaneously be “highly-regulated and “free”.

  • Brad Warbiany


    You’re not surprised or upset, because you’re paying attention. I suspect many of our other readers take this sort of news with the sort of grim realization that the government has now reached a point where they don’t have to hide their thuggery inside the velvet glove — they can show the iron fist outright.

    But this blog is also about outreach. And if we can get enough people who never saw the fist before (only the glove) to recognize it now, maybe it will have an impact.

    I can’t add any more words to this post, because what Paulson admitted is evidence enough.

  • Kathryn Rebecca

    Naturally, the officials at BoA would have been seriously incompetent (or just plain crazy) to deny “aid” from the government. Naturally.

  • Jeff Molby

    I guess I’m just advocating a more clinical handling of such events. With so much evidence on our side, I don’t think we should be pounding the table.

    You’ve been paying attention too, so you can’t honestly be “overcome with consternation, shock, or dismay“. Instead of acting surprised for dramatic effect, consider taking the opposite approach. Perhaps create an ongoing series of posts called “Government is Coercion”.

    By the time you reached “Government is Coercion #529”, you would accurately convey the enormity of the situation without resorting to the kind of hyperbole that most people get adept at tuning out. You’d stand out by being one of the few calm, rational guys in the political blogosphere.

  • Ben Kenobi

    I’d respect Ken Lewis more if he told Paulson to go fuck himself and then leaked it all to the media.

  • Brad Warbiany


    I was a bit taken aback with how brazen Paulson described his actions… I guess he can get away with that now that he’s not in office any more… Usually this kind of stuff comes out in leaked documents or third-party complaints, not with the party in question flat admitting it in front of Congress. There was some surprise not that it happened, but in how it was admitted.


    Yeah, that would have been nice. He could have embarrassed everyone involved possibly to the point of derailing the plan entirely.

  • Pingback: Shakedown!()