By — PBS News Hour PBS News Hour Leave your feedback Share Copy URL https://www.pbs.org/newshour/economy/business-july-dec09-paulson_07-16 Email Facebook Twitter LinkedIn Pinterest Tumblr Share on Facebook Share on Twitter Paulson Rebuts Congress’ Rebuke on Bank Merger Economy Jul 16, 2009 4:35 PM EDT “The American people, investors and the Congress were kept in the dark,” Rep. Edolphus Towns said to Paulson. “There was no oversight to determine whether this arrangement made sense. In my view, this is unacceptable and must be prevented from happening again,” said Towns, the New York Democrat who chairs the House of Representatives Oversight and Government Reform panel. Paulson surrendered little ground at the hearing, saying he told Bank of America CEO Kenneth Lewis the bank’s management and board could lose their jobs if the company backed out of the merger, but arguing he did nothing inappropriate in warning Lewis that such a move would be a blunder and might have repercussions. “I was attempting to send a very strong message to Ken Lewis,” he said, adding that he believed his remarks were “appropriate,” according to news agency reports. Paulson said he didn’t tell the bank’s chief to hide potential losses from shareholders. The former Treasury chief 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. He added that negotiations were kept private to protect investors. “We didn’t want to overly scare people and make it worse,” Paulson told the House panel. Listen to Paulson’s opening statement and his response to some questions from the committee: His testimony comes as Congress debates whether to expand the Federal Reserve’s power to monitor large, influential institutions like Bank of America. Towns said he believes Lewis squeezed money out of the government by threatening to back out on the deal. The government ultimately gave $20 billion to the bank to ease losses tied to the acquisition. “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 that he threatened to oust Lewis and said he never told anyone else to do so. But another Fed official suggested otherwise in an e-mail obtained by House investigators, the Associated Press reported. Jeffrey Lacker, president of the Richmond Federal Reserve Bank, said in a December e-mail that Bernanke 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.” Government pressure on Lewis and Bank of America to go through with the deal came to light in April and has become a focal point of congressional frustration over extensive bailouts of the financial system. Bernanke and Lewis testified at previous hearings. “As most people look at this, they see a clear pattern of intimidation and deception,” Rep. Jim Jordan, an Ohio Republican, said on Thursday. Lawmakers sought to pin down Paulson on various decisions and actions they found questionable, but they ran into difficulty, due in part to Paulson leaving no e-mail trail. “I’ve never used it for any business communications. I’ve just never used it,” he told one lawmaker. Towns has said he plans to call officials from the Securities and Exchange Commission to testify on the merger. We're not going anywhere. Stand up for truly independent, trusted news that you can count on! Donate now By — PBS News Hour PBS News Hour
“The American people, investors and the Congress were kept in the dark,” Rep. Edolphus Towns said to Paulson. “There was no oversight to determine whether this arrangement made sense. In my view, this is unacceptable and must be prevented from happening again,” said Towns, the New York Democrat who chairs the House of Representatives Oversight and Government Reform panel. Paulson surrendered little ground at the hearing, saying he told Bank of America CEO Kenneth Lewis the bank’s management and board could lose their jobs if the company backed out of the merger, but arguing he did nothing inappropriate in warning Lewis that such a move would be a blunder and might have repercussions. “I was attempting to send a very strong message to Ken Lewis,” he said, adding that he believed his remarks were “appropriate,” according to news agency reports. Paulson said he didn’t tell the bank’s chief to hide potential losses from shareholders. The former Treasury chief 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. He added that negotiations were kept private to protect investors. “We didn’t want to overly scare people and make it worse,” Paulson told the House panel. Listen to Paulson’s opening statement and his response to some questions from the committee: His testimony comes as Congress debates whether to expand the Federal Reserve’s power to monitor large, influential institutions like Bank of America. Towns said he believes Lewis squeezed money out of the government by threatening to back out on the deal. The government ultimately gave $20 billion to the bank to ease losses tied to the acquisition. “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 that he threatened to oust Lewis and said he never told anyone else to do so. But another Fed official suggested otherwise in an e-mail obtained by House investigators, the Associated Press reported. Jeffrey Lacker, president of the Richmond Federal Reserve Bank, said in a December e-mail that Bernanke 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.” Government pressure on Lewis and Bank of America to go through with the deal came to light in April and has become a focal point of congressional frustration over extensive bailouts of the financial system. Bernanke and Lewis testified at previous hearings. “As most people look at this, they see a clear pattern of intimidation and deception,” Rep. Jim Jordan, an Ohio Republican, said on Thursday. Lawmakers sought to pin down Paulson on various decisions and actions they found questionable, but they ran into difficulty, due in part to Paulson leaving no e-mail trail. “I’ve never used it for any business communications. I’ve just never used it,” he told one lawmaker. Towns has said he plans to call officials from the Securities and Exchange Commission to testify on the merger. We're not going anywhere. Stand up for truly independent, trusted news that you can count on! Donate now