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Bernanke Emerges From Hearing Bloodied But Unbroken

UPDATED at 1:24 p.m.:

Fed Chairman Ben Bernanke just wrapped up more than three hours of grilling at the hands of a hostile House Oversight committee digging to find out if Bernanke forced Bank of America chief executive Ken Lewis to go through with a merger with Merrill Lynch and if he tried to cover up his tracks.

Committee Republicans, led by Rep. Darrell Issa (R-Calif.), hammered Bernanke, saying he misused government power to force Lewis through with the deal.

Committee Democrats, led by Rep. Dennis Kucinich (D-Ohio), hammered Bernanke on what they called the Fed's failure to recognize Merrill's growing losses.

For his part, Bernanke said he and the Fed did nothing wrong and he did not threaten Lewis with firing if he pulled out of the Merrill deal.

The closest we got, maybe, to the truth was this: The committee produced an e-mail from a Richmond Fed president Jeffery Lacker to Bernanke that seemed to imply the Fed was threatening Lewis with firing.

Bernanke, however, characterized the e-mail and discussion prior to it this way: What Lacker was saying was that IF Lewis pulls out of the Merrill deal and IF that imperils Bank of America to the point that the Fed has to rescue Bank of America "on a Sunday afternoon," then THAT would probably cost Lewis his job.

Clear now?

Good. That makes one of us.

Bernanke: Ken Lewis's Job Is Safe -- For Now

12:48 p.m.: Fed Chairman Ben Bernanke, testifying before the House Oversight committee right now about his role in the Bank of America-Merrill Lynch merger last year, said that Bank of America chief executive Ken Lewis' job is safe -- for now.

Bernanke, who denies that he threatened to fire Lewis, nevertheless said that the Fed has been evaluating the bank on several fronts, including the management, and decided last December "that [Lewis] could continue to lead the company."

"But," Bernanke added, somewhat ominously, "we will continue to evaluate that."

Bernanke Will Not Say Bank Of America's Lewis Is 'Competent'

11:56 a.m.: Rep. Elijah Cummings (D-Md.), always one to stir up the pot good, just asked Fed Chairman Ben Bernanke if he believes that Bank of America chief executive Ken Lewis is "competent."

Bernanke paused.

Cummings pressed: "Yes, or no?"

"That's not a yes or no question," Bernanke said. Make no mistake: *that's* a dagger.

Bernanke has made clear in testimony today that he does not believe Lewis is a good chief executive.

Chaffetz To Bernanke: Really, How Can You Not Say You Threatened Lewis?

11:40 a.m.: Rep. Jason Chaffetz (R-Utah) just got to the nub of the point in the House Oversight hearing underway right now, which is grilling Fed Chairman Ben Bernanke on his role in strong-arming Bank of America to conclude its troubled merger with Merrill Lynch last year.

Chaffetz: Do you have the power to replace a board and a chief executive?

Bernanke: "That's a good question." He added that Treasury has some influence over the management of bailout-receiving companies, like Bank of America, "but has not used that influence," he said.

Chaffetz went on to make a pretty compelling case that Bernanke may not have the authority but certainly had a pretty big stick to wave at Bank of America Ken Lewis to pressure him to complete the merger, implying that he was a bad manager.

"If you're questioning someone's judgment and you're in a supervisory role with the authority to let them go, how is that not a threat?" Chaffetz asked.

Bernanke went on to repeat his point: We at the Fed think it would be a very, very bad idea for both you and the markets if you were to pull out of your merger with Merrill Lynch. But, hey -- it's your call.

Bernanke said a few minutes earlier that he has "nothing to regret" about the way he and the Treasury steered Bank of America to conclude its merger with Merrill Lynch last year.

Bernanke is clearly getting frustrated by this tough line of questioning from both Republicans and Democrats. His voice is quavering from time to time, though he has yet to raise it.

Bernanke does not snap back at accusers. Instead, he deftly humiliates them. At one previous hearing, he told a congressman that the premise of his question was flawed. For the even-keeled Bernanke, that's serious smack-talk.

The Fed has refused to disclose the names of almost all of the more than 400 financial companies that it has helped to bail out during the financial crisis, The Post's Binyamin Appelbaum reports.

It also is not subject to regular audits imposed on other parts of the government. Rep. John Duncan (R-Tenn.) presses Bernanke on this secrecy: "Do you feel the Federal Reserve is operating with too much secrecy and too much refusal to disclose?"

Bernanke is vigorous in defense. He says the Fed has made "great strides" under his leadership to disclose more information, and that the Fed is willing to consider specific requests from Congress.

He argues, however, that subjecting the Fed to audits would be disastrous because he says it would give Congress a means of influence over monetary policy, with dire consequences for "our national economic situation."

And Rep. Patrick McHenry (R-N.C.) presses Bernanke about the role of Treasury Secretary Tim Geithner, who at the time was president of the Federal Reserve Bank of New York.

"It seems to me that he was all over this," said McHenry.

"No," said Bernanke, "to the best of my knowledge he was not involved in the detailed negotiations."

Rep. Burton to Bernanke: Is Ken Lewis Lying?

11 a.m.: Rep. Dan Burton (R-Ind.) is taking his whacks at Fed Chairman Ben Bernanke now, trying to figure out if he or Bank of America chief executive Ken Lewis is lying about the Fed's role in pushing Bank of America to go through with its merger last year with Merrill Lynch.

(Note: The Ticker is taking notes as we're watching this hearing. Statements that appear in quotes are those that we're sure we got right, word-for-word. Statements that appear out of quotes are those that we didn't get word-for-word, so we're paraphrasing them. We really need TiVo.)

Burton: "Is Mr. Lewis lying?"

Bernanke: "All I know is that I never said I would replace the board and management [of Bank of America] if he" pulled out of the deal.

Burton: Did [former Treasury Secretary] Hank Paulson lie when he told New York Attorney General Andrew Cuomo that he was acting under your suggestion or orders to replace the management and board?

Bernanke: "I believe he's modified that statement."

Burton was unmoved, and suggested Bernanke was perjuring himself. Bernanke said that Paulson later modified his statement to say, No, Bernanke didn't tell me to tell Ken Lewis he would be fired, but I inferred that.

Bernanke: 'I Did Not' Threaten Bank of America's Lewis with Firing

10:45 a.m.: House Oversight chair Rep. Edolphus Towns (D-N.Y.) got right to the point of today's hearing with Fed Chairman Ben Bernanke and his role in possibly strong-arming Bank of America to go through with its merger with Merrill Lynch last year.

Bank of America chief executive Ken Lewis has testified twice under oath that Bernanke told him (Lewis) that he and the bank's board would be removed if it didn't go through with the deal.

Towns: Did you tell former Treasury Secretary Hank Paulson to tell Ken Lewis that he and the Bank of America board would be removed if they didn't go through with the merger?

Bernanke: "I did not. I did not instruct Mr. Paulson or anyone else to to convey such a threat or message to Mr. Lewis."

Towns: Did you tell Mr. Lewis you would fire him or the board?

Bernanke: "I did not."

So there it is. Either Bernanke or Lewis is not telling the truth. Under oath.

Lewis testified that the Fed threatened to fire senior executives and internal Fed e-mails show that senior regulators discussed making such a threat with Bernanke, The Post's Binyamin Appelbaum reports.

Bernanke offered two defenses. He said that the threat was to remove management if it walked away from the deal and subsequently needed additional federal aid. He also said, notwithstanding the internal discussions, he did not communicate the threat to Bank of America and did not know that anyone else had done so.

Bernanke Hearing Gets Underway

10:12 a.m.: As the Joker said to Batman in "The Dark Knight:" "And here...we...go!"

Fed Chairman Ben Bernanke is set to begin testimony before the House Oversight committee in a few minutes, answering charges from committee ranking member Rep. Darrell Issa (R-Calif.) that he (Bernanke) engaged in a "cover-up" to hide the fact that her strong-armed Bank of America into going through with its merger with Merrill Lynch last fall, even as B of A was getting cold feet.

Maybe this will prove to be one big misunderstanding, Issa just said. "But I don't think so," he added.

Bernanke said in his opening statement: "I believe that the Federal Reserve acted with the highest integrity throughout."

Here's the hot spot of Bernanke's testimony:

"I did not tell Bank of America's management that the Federal Reserve would take action against the board or management if they decided to proceed with [pulling out of the merger]. Moreover, I did not instruct anyone to indicate to Bank of America that the Federal Reserve would take any particular action under those circumstances."

This directly contradicts under-oath testimony *twice* delivered by Bank of America chief executive Ken Lewis who said Bernake told him (Lewis) that he and the bank's board would be removed by the Fed if they pulled out of the deal.

To read Bernanke's entire statement, click here.

-- Frank Ahrens
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By Frank Ahrens  |  June 25, 2009; 1:24 PM ET
Categories:  The Ticker  | Tags: Bank of America, Ben Bernanke, Darrell Issa, Federal Reserve, Ken Lewis, Merrill Lynch  
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Comments

Bernanke's a liar! All he's been doing this whole time is protect his banking buddies and his goldmen stock.

Posted by: obrier2 | June 25, 2009 1:10 PM | Report abuse

It is very clear that officials at the federal reserve used "brute" force and caused the outcome to be one they wanted -- why would they give BOfA money otherwise -- if BOfA said they'll walk away, the federal reserve wouldn't have given the money to BOfA.

Posted by: free_np | June 25, 2009 8:33 PM | Report abuse

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