A comment on this blog implied (if I understood itÂ correctly) that the Treasury has constructed an hidden, unwritten, informal, and illegal trust.Â This National Recovery Trust, a 21st century analogy to the National Recovery Administration, discourages banks and financial institutions from competing against each other, as they would have to make up for each others losses, if those losses imperiled their ability to pay back their TARP loans.
The National Recovery Trust is not the only criminal activity the Treasury department is being accused of engaging in:
STEVE HENN: If Henry Paulson and Ben Bernanke really told the CEO of Bank of America to keep quiet about losses at Merrill Lynch, they were probably breaking the law. That’s according to Lynn Turner, former chief accountant at the SEC.
LYNN TURNER: If these allegations are proven true, both Bernanke and Paulson should be prosecuted by the SEC to the fullest extent of the law.
Paulson told investigators that he threatened to have Ken Lewis fired but that he didn’t instruct Bank of America to withhold material information. Ken Lewis says he did.
This isn’t the only time officials have allegedly pressured companies concerning SEC disclosures. Regulators reportedly leaned on Freddie Mac executives not to reveal that an administration foreclosure prevention program could cost the company $30 billion. John Coffee, a securities expert at Columbia University, says there’s an inherent problem when firms are privately run in name only.
My idea for prosecution of officials in the Treasury Department is becoming less fanciful with each passing day.