Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
AI Tech Stocks State Going into the CRASH and Capitalising on the Metaverse - 25th Jan 22
Stock Market Relief Rally, Maybe? - 25th Jan 22
Why Gold’s Latest Rally Is Nothing to Get Excited About - 25th Jan 22
Gold Slides and Rebounds in 2022 - 25th Jan 22
Gold; a stellar picture - 25th Jan 22
CATHY WOOD ARK GARBAGE ARK Funds Heading for 90% STOCK CRASH! - 22nd Jan 22
Gold Is the Belle of the Ball. Will Its Dance Turn Bearish? - 22nd Jan 22
Best Neighborhoods to Buy Real Estate in San Diego - 22nd Jan 22
Stock Market January PANIC AI Tech Stocks Buying Opp - Trend Forecast 2022 - 21st Jan 21
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
WARNING - AI STOCK MARKET CRASH / BEAR SWITCH TRIGGERED! - 19th Jan 22
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22
Best Metaverse Tech Stocks Investing for 2022 and Beyond - 14th Jan 22
Gold Price Lagging Inflation - 14th Jan 22
Get Your Startup Idea Up And Running With These 7 Tips - 14th Jan 22
What Happens When Your Flight Gets Cancelled in the UK? - 14th Jan 22

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Bernanke Suffers From Selective Memory Loss; Paulson Calls Bank of America "Turd in the Punchbowl"

Politics / Credit Crisis 2009 Jun 26, 2009 - 03:06 AM GMT

By: Mike_Shedlock

Politics

Best Financial Markets Analysis ArticleFed chairman Ben Bernanke's memory seems to be failing at an amazingly convenient time, for Bernanke. Please consider Bernanke Blasted in House.


Federal Reserve Chairman Ben Bernanke faced open hostility from lawmakers who barraged him during a Congressional hearing over his handling of the financial crisis and the central bank's role in reshaping the banking system.

Setting aside the deferential tone usually reserved for Fed chairmen, members of the House Committee on Oversight and Government Reform repeatedly interrupted Mr. Bernanke at Thursday's hearing to review the Fed's role in engineering a government aid package for Bank of America Corp. The lawmakers pored over internal Fed emails subpoenaed by the committee and projected on a screen in the hearing room.

Much of the heat focused on the Fed's part in pushing Bank of America to complete its acquisition of Merrill Lynch in January. House members on both sides grilled Mr. Bernanke on whether he threatened to force out Bank of America Chief Executive Kenneth Lewis. They accused him of inconsistencies in his statements and of keeping information from other agencies.

The biggest point of contention was over whether Mr. Bernanke threatened to oust Bank of America CEO Mr. Lewis. Bank of America approached top U.S. officials in mid-December about abandoning its deal to buy Merrill Lynch.

Mr. Bernanke defended the Fed's actions, saying the central bank acted with the "highest integrity" in the negotiations with Bank of America. "I did not tell Bank of America's management that the Federal Reserve would take action against the board or management," Mr. Bernanke said, adding that the decisions were "taken under highly unusual circumstances in the face of grave threats to our financial system and our economy."

Lawmakers pointed to a Dec. 20 email written by Richmond Fed President Jeffrey Lacker. One of a series unearthed by the panel, the email recounts a conversation between Messrs. Lacker and Bernanke in which the Fed chief planned to tell Bank of America that "management is gone," if they quashed the deal and later needed more government aid, wrote Mr. Lacker.

Pressed on the issue, Mr. Bernanke said he didn't make such a comment to Mr. Lewis and didn't remember that part of the conversation with Mr. Lacker.

Rep. Dan Burton, (R., Ind.), a former Oversight chairman, said people often used such language to avoid perjuring themselves. "Are you sure you can't remember?"

The reams of documents gathered by the committee offer a rare glimpse inside the government's decision making at the height of the financial crisis. At one point, according to handwritten notes taken by an unnamed Fed official, Mr. Paulson refers to Bank of America as "the turd in the punchbowl." The notes were taken during a conference call in early January among top U.S. officials to discuss the government's rescue package.

How Did a Private Deal Turn Into a Federal Bailout?

Today the Committee on Oversight and Government reform released some documents investigating the question "How Did a Private Deal Turn Into a Federal Bailout?"

Calculated Risk commented on this earlier in House Committee on Oversight Releases BofA Merrill Documents. Here is a snip from one the documents that Calculated Risk pointed out.



Bernanke Grilling May Weaken Case for Fed as Risk Regulator

Here's something we should all be hoping for: Bernanke Grilling May Weaken Case for Fed as Risk Regulator.

Chairman Ben S. Bernanke’s grilling by legislators over Federal Reserve conduct in Bank of America Corp.’s takeover of Merrill Lynch & Co. may reduce the odds the central bank will win new powers in a regulatory overhaul.

Bernanke failed to resolve some lawmakers’ questions on whether the Fed bullied executives and stepped over other regulators in the name of financial stability in a three-hour congressional hearing yesterday. Republicans asserted the Fed interfered with commercial decisions, and Democrats said it should have wrung more concessions in return for taxpayer aid.

Criticisms by members of both parties are likely to diminish support for the Obama administration’s plan to make the Fed the single agency responsible for the largest and most interconnected financial institutions. The proposal, part of a broad revamp of bank regulation, would give the Fed power to dictate standards on capital, liquidity and risk management.

“It may be more important for us to find another systemic risk regulator,” Representative Paul Kanjorski, a Pennsylvania Democrat and member of the House Oversight Committee where Bernanke appeared, said in a Bloomberg Television interview after the hearing. Congress should “hesitate to put any more authority on the back of the Federal Reserve,” he said.

Representative Darrell Issa, the ranking Republican on the House panel, said the Fed’s actions “ought to be a note of caution to those who want to dramatically increase its power and authority.”

“There’s something rotten in the cotton here -- no ifs, ands or buts about it,” Representative Edolphus Towns, a New York Democrat who chairs the House Oversight Committee, told reporters after the hearing. “There was a forced situation, a shotgun wedding” and “we’re just trying to find out who had the shotgun.”

Bernanke's Selective Memory Loss

When it comes to memory loss, there is virtually no chance that Bernanke could have forgotten a conversation with Fed Governor Lacker in which Bernanke planned to tell Bank of America that "management is gone".

That is not the kind of conversation that anyone forgets, except on purpose. With that in mind "Elective Memory Loss" is a more fitting term.

Let the Criminal Indictments Begin: Paulson, Bernanke, Lewis

Selective memory loss is hard to prove. However, we do not yet fully know what's in memos and Emails circulating at the Fed.

The case against Bank of America CEO Ken Lewis and former Treasury Secretary Hank Paulson is rock solid. I say go for it. Let the Criminal Indictments Begin: Paulson, Bernanke, Lewis.

New York State Attorney General Andrew Cuomo's letter to the SEC and Senate Banking Committee on the Bank of America, Merrill Lynch Merger provides strong evidence of coercion to commit securities fraud by former Treasury Secretary Paulson and Fed Chairman Ben Bernanke, and actual securities fraud by Bank of America CEO Kenneth D. Lewis.

Bank of America's attempt to exit the merger came to a halt on December 21, 2008. That day, Lewis informed Secretary Paulson that Bank of America still wanted to exit the merger agreement. According to Lewis, Secretary Paulson then advised Lewis that, if Bank of America invoked the MAC, its management and Board would be replaced.

In an interview with this Office, Secretary Paulson largely corroborated Lewis's account. On the issue of terminating management and the Board, Secretary Paulson indicated that he told Lewis that if Bank of America were to back out of the Merrill Lynch deal, the government either could or would remove the Board and management.

The Fed is largely to blame for the housing/credit bubble by holding interest rates too low, too long. The way to control risk is to get rid of the Fed and its micro-mismanagement of interest rates, not to extend the Fed's power.

By Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Click Here To Scroll Thru My Recent Post List

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management . Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.

Visit Sitka Pacific's Account Management Page to learn more about wealth management and capital preservation strategies of Sitka Pacific.

I do weekly podcasts every Thursday on HoweStreet and a brief 7 minute segment on Saturday on CKNW AM 980 in Vancouver.

When not writing about stocks or the economy I spends a great deal of time on photography and in the garden. I have over 80 magazine and book cover credits. Some of my Wisconsin and gardening images can be seen at MichaelShedlock.com .

© 2009 Mike Shedlock, All Rights Reserved

Mike Shedlock Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in