I just sat down and digested the B of A/Merrill Lynch Merger Investigation letter and I felt like I was reading excerpts from a Godfather IV script treatment.
Ken Lewis is no innocent, but Hank Paulson comes off like a f@ckin’ psycho in Andrew Cuomo‘s letter to the SEC and TARP oversight committee. Cuomo basically gets Lewis to admit that he was taking one for the team (America) at the expense of his own shareholders, but Lewis would only admit that the negative impact of buying loss-laden Merrill would affect shareholders with a short-term time horizon.
That’s like a deli owner knowingly poisoning customers with day-old egg salad only between noon and two pm, followed by a fresh batch being put out for the dinner rush.
There are also several insinuations uncovered by Cuomo’s investigation that Paulson threatened the board of Bank of America with losing their jobs if they publicly discussed Merrill’s imploding financial condition or sought to terminate the merger agreement.
Ben Bernanke‘s Fed looms largely in the background of some of these discussions as well, although it doesn’t seem that Lewis coughed up any direct quotes from the Bearded One.
This is probably the last straw for many B of A shareholders who were on the fence about Ken Lewis’ future. I predict he gets shown the door come April 29th at the Annual Shareholder Jamboree or he resigns over this coming weekend to spare himself the humiliation.
Now that we’ve gotten some glimpses into how this sh#t was going down last fall in the heat of the crisis, we should ask ourselves the following questions…
“Who else was strong-armed into poor decisions by Hank the Tank under the guise of preventing systemic risk?”
“Was Bernanke using similar tactics in his dealings with corporate officials behind closed doors?”
“Given that Bernanke’s Fed is not actually a part of the US government, shouldn’t we be concerned about its ever expanding authority, which apparently now includes dictating the terms of corporate mergers?”
“Were there other government-coerced shotgun weddings or TARP recipient actions that need to be looked into so that we, as investors and citizens, can get a more clear picture about what the new rules of the game may be?
“Where did that Bond Villain-lookin’ Neel Kashkari sneak off to and was he shaking his fist while shouting about ‘being back’ or stroking a cat on his way out?”
OK, I got carried away with that last one, but certainly, these questions and others will linger for a long time to come…Especially if you were a shareholder of Wells Fargo during the Wachovia deal.
The letter from Cuomo to those charged with watching the TARP and it’s participants is everywhere, but here’s a link to it on FT Alphaville: