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
Silver Long-term Trend Analysis - 28th Nov 21
Silver Mining Stocks Fundamentals - 28th Nov 21
Crude Oil Didn’t Like Thanksgiving Turkey This Year - 28th Nov 21
Sheffield First Snow Winter 2021 - Snowballs and Snowmen Fun - 28th Nov 21
Stock Market Investing LESSON - Buying Value - 27th Nov 21
Corsair MP600 NVME M.2 SSD 66% Performance Loss After 6 Months of Use - Benchmark Tests - 27th Nov 21
Stock Maket Trading Lesson - How to REALLY Trade Markets - 26th Nov 21
SILVER Price Trend Analysis - 26th Nov 21
Federal Reserve Asks Americans to Eat Soy “Meat” for Thanksgiving - 26th Nov 21
Is the S&P 500 Topping or Just Consolidating? - 26th Nov 21
Is a Bigger Drop in Gold Price Just Around the Corner? - 26th Nov 21
Financial Stocks ETF Sector XLF Pullback Sets Up A New $43.60 Upside Target - 26th Nov 21
A Couple of Things to Think About Before Buying Shares - 25th Nov 21
UK Best Fixed Rate Tariff Deal is to NOT FIX Gas and Electric Energy Tariffs During Winter 2021-22 - 25th Nov 21
Stock Market Begins it's Year End Seasonal Santa Rally - 24th Nov 21
How Silver Can Conquer $50+ in 2022 - 24th Nov 21
Stock Market Betting on Hawkish Fed - 24th Nov 21
Stock Market Elliott Wave Trend Forecast - 24th Nov 21
Your once-a-year All-Access Financial Markets Analysis Pass - 24th Nov 21
Did Zillow’s $300 million flop prove me wrong? - 24th Nov 21
Now Malaysian Drivers Renew Their Kurnia Car Insurance Online With Fincrew.my - 24th Nov 21
Gold / Silver Ratio - 23rd Nov 21
Stock Market Sentiment Speaks: Can We Get To 5500SPX In 2022? But 4440SPX Comes First - 23rd Nov 21
A Month-to-month breakdown of how Much Money Individuals are Spending on Stocks - 23rd Nov 21
S&P 500: Rallying Tech Stocks vs. Plummeting Oil Stocks - 23rd Nov 21
Like the Latest Bond Flick, the US Dollar Has No Time to Die - 23rd Nov 21
Why BITCOIN NEW ALL TIME HIGH Changes EVERYTHING! - 22nd Nov 21
Cannabis ETF MJ Basing & Volatility Patterns - 22nd Nov 21
The Most Important Lesson Learned from this COVID Pandemic - 22nd Nov 21
Dow Stock Market Trend Analysis - 22nd Nov 21
UK Covid-19 Booster Jabs Moderna, Pfizer Are They Worth the Risk of Side effects, Illness? - 22nd Nov 21
US Dollar vs Yields vs Stock Market Trends - 20th Nov 21
Inflation Risk: Milton Friedman Would Buy Gold Right Now - 20th Nov 21
How to Determine if It’s Time for You to Outsource Your Packaging Requirements to a Contract Packer - 20th Nov 21
2 easy ways to play Facebook’s Metaverse Spending Spree - 20th Nov 21
Stock Market Margin Debt WARNING! - 19th Nov 21
Gold Mid-Tier Stocks Q3’21 Fundamentals - 19th Nov 21
Protect Your Wealth From PERMANENT Transitory Inflation - 19th Nov 21
Investors Expect High Inflation. Golden Inquisition Ahead? - 19th Nov 21
Will the Senate Confirm a Marxist to Oversee the U.S. Currency System? - 19th Nov 21
When Even Stock Market Bears Act Bullishly (What It May Mean) - 19th Nov 21
Chinese People do NOT Eat Dogs Newspeak - 18th Nov 21
CHINOBLE! Evergrande Reality Exposes China Fiction! - 18th Nov 21
Kondratieff Full-Season Stock Market Sector Rotation - 18th Nov 21
What Stock Market Trends Will Drive Through To 2022? - 18th Nov 21
How to Jump Start Your Motherboard Without a Power Button With Just a Screwdriver - 18th Nov 21
Bitcoin & Ethereum 2021 Trend - 18th Nov 21
FREE TRADE How to Get 2 FREE SHARES Fractional Investing Platform and ISA Specs - 18th Nov 21
Inflation Ain’t Transitory – But the Fed’s Credibility Is - 18th Nov 21
The real reason Facebook just went “all in” on the metaverse - 18th Nov 21
Biden Signs a Bill to Revive Infrastructure… and Gold! - 18th Nov 21
Silver vs US Dollar - 17th Nov 21
Silver Supply and Demand Balance - 17th Nov 21
Sentiment Speaks: This Stock Market Makes Absolutely No Sense - 17th Nov 21
Biden Spending to Build Back Stagflation - 17th Nov 21
Meshing Cryptocurrency Wealth Generation With Global Fiat Money Demise - 17th Nov 21
Dow Stock Market Trend Forecast Into Mid 2022 - 16th Nov 21
Stock Market Minor Cycle Correcting - 16th Nov 21
The INFLATION MEGA-TREND - Ripples of Deflation on an Ocean of Inflation! - 16th Nov 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Paulson Admits Coercion in Handling of Economic Crisis

Politics / Credit Crisis Bailouts Jul 18, 2009 - 07:14 AM GMT

By: Mike_Shedlock

Politics

Best Financial Markets Analysis ArticleFormer 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.

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