Tag Archives: Bank of America

The Cover-Up, not the Crime

Interesting pieces, on how Federal Reserve Chairman Ben Bernanke and Goldman Sachs CEO / Treasuury Secretary Henry Paulson threatened to fire the board and manage of Bank of America, unless the Bank agreed to spend money on projects that were politically popular with the right people.

No surprise, except

Congressional hearings into these allegations were conducted on June 25, 2009, with Bernanke testifying that he did not bully Ken Lewis. Under intense questioning by members of Congress, Bernanke said, “I never said anything about firing the board and the management [of Bank of America].”

The End of the Free Market Economy

Courtesy of Razib

But some observers now say that Paulson’s injection of public capital was the beginning of unprecedented government involvement in the nation’s banking system, with consequences few understood.

“I think we nationalized the banks in the U.S. on that day,” former International Monetary Fund chief economist Simon Johnson says. “The government got a lot of say in how they are run, a lot of constraints, a lot of responsibility. A lot of downside risk was taken on that day.”

By December, Lewis was discovering what it meant to have the government as a partial owner. When fourth-quarter losses at Merrill grew to $15 billion, Lewis began to look for a way to get out of the deal. But in tense negotiations with government officials, Lewis was told he had no choice. If he did not go through with the merger, regulators threatened to change the bank’s management.

“Ken Lewis blinked, the full force of the government is being brought upon him. The rules of the game have changed,” Wall Street Journal reporter Dan Fitzpatrick says. “Ken Lewis is on top of the financial services world, but he’s not in charge. The government holds all the cards at the end of the day.”

via FRONTLINE: breaking the bank: video – watch the full program | PBS.

Of course, treason charges against Geithner won’t involve this (the establishment of Socialism was (a) a policy choice under (b) the previous administration), but his siding with the tribal raid against the US government in early 2009. Criminal charges, which are much more likely to be brought, are more mundane, and involve collusion, racketeering, insider-trading, and so on.

More money to Citi shareholders!

You would take it requires a pretty incompetent Treasury Secretary to so badly oversee the transfer of trillions worth of loans, grants, and guarantees to financial institutions that, even after those trillions, two of the largest are still insolvent.

You would be right.

April 28 Bloomberg — Bank of America Corp. and Citigroup Inc. have been told by regulators that they may need to raise more capital as a result of U.S. stress tests on lenders, the Wall Street Journal said, citing people familiar with the matter.

Bank of America’s shortfall comes to billions of dollars, the newspaper reported. Both banks plan to mount a detailed rebuttal to the Federal Reserve’s preliminary report following the tests conducted on 19 large financial companies, and Bank of America may appeal today, the Journal said.

via Fed Questions Citi, Bank of America on Capital, WSJ Reports – Bloomberg.com.

Timothy Geithner has already given trillions worth of loans, grants, and guarantees to his friends in Manhattan, and the shareholders who enabled them.  Considering where this has got him (a promotion to DC), why should he stop?

The Confusion, Part III

“If you want it like hell, you will get it like hell”


Those who listened to what Obama said during the campaign, and believed it, will be surprised as Treasury’s transfiguration into a xenophobic kleptocracy.

Those who read this blog, however, will not be.

The problem is not that Barack Obaam is a xenophobic kleptocrat. The problem is that Barack Obama has no idea what to do.

I’m not saying this because, when I ask myself “Who can fix the global economy?,” “A lawyer!” is not the answer that springs to mind. And I am not saying this because Geithner appears to be a uniquely awful chocie as Treasury Secretary. As I said last June:

Obama as Bush III – a guy of slightly more than average intelligence whose first term will be a triumph of cabinet politics over whatever Obama actually believed coming in — would be a good thing. If Obama is as incompetent as he appears, his incompetence ceases to be an issue, because he would not be able to implement his ideas

However, Obama has not been content to let others make important decisiosn for him in a deliberate fashion. He has wanted results, badly. Obama wanted results like hell, and he got them like hell.

Consider two recent stories:

Big Bonus Plants at AIG
American International Group, the insurer that has received more than $170 billion in taxpayer bailout money from the U.S. Treasury and Federal Reserve, plans to pay about $165 million in bonuses to executives in the same business unit that brought the company to the brink of collapse last year.


US bank withdraws offers from H-1B grads
It did not take long for the chilling effect of new restrictions on hiring skilled foreign workers on H-1B visas to be felt. Bank of America has withdrawn job offers to foreign MBA students set to graduate from U.S. business schools.

If you read down in the stories, you see the AIG story happens because the Obama administration, in spite of simultaneously being the company’s largest shareholder and largest credtor, has no leverage in this circumstance. The Bank of America story happened in response to the two “Buy American” bills that Obama has signed into laws.

Of course, Obama did not plan these outcomes. Obama did not plan Treasury actions that give hundreds of millions to people who did the worst job in the history of the world and publicly high-skilled kick foreigners out of the country. What Obama plans has little relation to what he plans.

Obama is an incomeptent in a hurry. Obama wants to fix the economy like hell. That explains why Obama is fixing up the economy like hell.