Friday, April 24, 2009

Bernanke, Paulson, and Lewis: He Said, She Said

We are in for a fresh round of escalating recriminations.

Bank of America CEO Ken Lewis testified to New York Attorney General Andrew Cuomo that he was pressured to do the Merrill Lynch deal, and moreover, that he was told not to disclose the extent of ML damage to shareholders in advance of the vote authorizing the acquisition. Paulson, and the Fed, quickly followed with press releases indicating that they did no such thing.

Even in these early stages of this emerging scandal, the next steps are highly likely:

1. There will be a Congressional investigation, and it will be embarrassing to all concerned, including President Obama.
2. Ken Lewis will finally resign as CEO of Bank of America.
3. Americans will learn more about how Treasury sausage is made, and it will be an eye-opener.

There is no reason why government cannot play a constructive role in the development and growth of businesses. The history of business indicates that such a role can be highly valuable, but almost always in the earliest stages of an industry’s development. Mixing government and business in the intimate manner we are observing these last several months creates all sorts of complications, conflicts of interest, and collisions. The story of Bernanke, Paulson, and Lewis is about to spill out of the bedroom.

No comments:

Post a Comment