Congressional Oversight Panel sent a letter to Geithner & Bernanke questioning the threats and strong arm tactics used to force Bank of America to complete the acquisition of Merrill Lynch even though they wanted to back out.

In a letter to Timothy F. Geithner, Secretary of the Treasury and Honorable Ben S. Bernanke, Chairman Board of Governors of the Federal Reserve System, the Congressional Oversight Panel references a letter from New York State Attorney General, Andrew Cuomo, dated April 23, 2009, to Senator Christopher Dodd, the Chairman of the Senate Committee on Banking, Housing, and Urban Affairs; Congressman Barney Frank, the Chairman of the House Financial Services Committee; Mary Schapiro, the Chairman of the U.S. Securities and Exchange Commission; and  Chair of the Congressional Oversight Panel that asserts that “the Department of the Treasury
and the Federal Reserve Board intervened to alter the course of the then-pending acquisition of Merrill Lynch by Bank of America (“BofA”).”

The letter charges that “the discussions came when Treasury and the Board learned that BofA had concluded that it could, and should, stop the transaction because of Merrill Lynch’s deteriorating financial condition. Mr. Lewis has indicated in a statement made under oath to the Attorney General’s investigators that he changed his mind about ending the merger after it was strongly suggested that the government would remove BofA’s Board of Directors and senior management if the transaction were terminated, but that if it completed the transaction, BofA would receive additional federal assistance to provide a financial cushion for its taking on Merrill Lynch’s liabilities. Treasury had made a $25 billion capital infusion into BofA in October 2008, and it made an additional $20 billion infusion into BofA in January 2009, after the Merrill Lynch acquisition was completed.”

So the Treasury Department use coercion, threat of dismissal and/ or bribery, without disclosure to the shareholders or the public, to force BofA to complete the merger with Merrill Lynch despite their knowledge of its deteriorating financial condition and their decision not to proceed. This is a tyrannical government.

The Congressional Oversight Panel letter goes on to say “The fact and nature of the discussions among the Treasury, the Board, and BofA – whatever their exact content – were disclosed neither to the shareholders of BofA nor to the public, whose tax dollars the TARP spends.”

“More important, this interaction among Treasury, the Board, and BofA is a warning of the dangers that can arise when the government acts simultaneously as
regulator, lender of last resort, and shareholder. (Treasury had purchased $15 billion in convertible preferred stock and warrants of BofA on October 28, 2008; as indicated above, it purchased an additional $20 billion of BofA preferred stock and warrants on January 16, 2009.) The TARP by its very nature creates conflicts of interest for Treasury and the Board.”

With its new broader powers in the recently passed financial regulatory bill, Treasury won’t even have to make threats. They can just take over.

Congressional Oversight Letter

~ Michael Whipple, Editor

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