From Bloomberg News;
Former Treasury Secretary Henry Paulson said letting Bank of America Corp. scuttle its takeover of Merrill Lynch & Co. last year was “unthinkable,” and his remarks about ousting management were “appropriate.”
Paulson “intended to deliver a strong message” to Chief Executive Officer Kenneth Lewis in December “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,” the former official said in remarks prepared for a congressional hearing tomorrow. The text was obtained today by Bloomberg News.
Lawmakers on the House Committee on Oversight and Government Reform are trying to determine whether regulators overstepped their authority by pressuring Bank of America to complete the purchase of Merrill. The panel has already heard from Lewis, who declined to characterize the pressure as a threat, and from Federal Reserve Chairman Ben S. Bernanke, who testified that Lewis had the final say on the Merrill takeover.
Paulson told Lewis on Dec. 21 that backing out of the deal “would show a colossal lack of judgment and would jeopardize Bank of America, Merrill Lynch, and the financial system,” according to the testimony. Paulson confirmed he had told Lewis the Fed might remove management and the board of the Charlotte, North Carolina-based bank if they failed to complete the takeover of New York-based Merrill Lynch.
Lewis told Congress last month the bank had considered abandoning the transaction in mid-December as losses at Merrill spiraled toward more than $15 billion. Bank of America completed the acquisition of New York-based Merrill Lynch in January without telling investors about the losses. The lender is the biggest in the U.S. by assets and deposits.
Ken: "Hank, I tried to do you boys a favor in September when the world was about to end by taking Merrill off your hands. Turns out this guy Thain is not only full of poop but he and his little buddies are trying to eat the entire place out from the inside. I'm breaking the transaction."
Hank: "You can't do that Ken. You try it and I'll toss you and your boys out."
Ken: "Oh yeah, you and what legal army chrome-dome? You're a lame duck with an approval rating of minus ten! These boys misrepresented themselves at that emergency sale back in September AND this $80 million head trader Montag is losing new money faster than a jack-rabbit humps. You ever see a jack rabbit.....
Hank: "Listen here Ken, when I was at Goldman we used to...
Ken: "First of all you ain't at Goldman anymore. Secondly, don't interrupt me again. Now Hank, I am the CEO of perhaps the most important bank in this country. I can invoke all sorts of market condition clauses that get me out of that Merrill trade. I know it and you might know it if you weren't so damn stupid. So we can play nice and you use that great big Goldman Sachs brain of yours and figure out a way to make these $15 billion of losses end up in that Omnibus Bill those boys in Washington pass every year. $15 billy clubs is a rounding error for those boys. OR I'll see your behind in court as the whole damn system goes down in flames. You choose Hank.
That's what I would have said if I were Kenny!