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July 16th, 2009

Paulson Testifies, What Has Been Accomplished?



Today was former Treasury Secretary Henry Paulson’s turn to testify in front of a Congressional committee regarding the Bank of America (BofA), Merrill Lynch merger. Previous testimony from BofA chief Ken Lewis claimed that his bank was strong armed by Federal regulators into accepting the merger that he had resisted. Today, Paulson had this to say:

“I further explained to [Lewis] that, under such circumstances, the Federal Reserve could exercise its authority to remove management and the board of Bank of America.”

By reminding Lewis of the Fed’s powers, Paulson intended to “deliver a strong message … 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,” according to the transcript.

Last month Federal Reserve Chief Ben Bernanke testified in front of the same committee. Mr. Bernanke claimed that he and the Federal Reserve had conducted the deal with the “highest integrity.” Furthermore, the Fed chief claimed he had no part in strong arming BofA and didn’t threaten the jobs of the bank’s board members.

Our suspicions that Federal regulators had strong armed the original nine TARP banks into accepting Federal funds were confirmed when Judicial Watch released an “unambiguous” document.

After three separate testimonies from the major parties involved, what new or revealing information has been presented? What did these series of testimonies accomplish beyond what we already knew? Unless the sole purpose of these testimonies was to find someone to take the fall, we’re not sure anything has been accomplished.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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