Bank Of America Executives Defend Merrill Lynch Deal

By Ravi Bhatia - Talk Radio News Service

Bank of America (BOA) executives, including two members of the bank’s board of directors, testified Tuesday in front of the House Oversight Committee to explain how a private deal between BOA and Merrill Lynch turned into a federal bailout.

The $50 billion deal between the two banks occurred in September, 2008 and saved Merrill Lynch from bankruptcy. A January 2009 report of its earnings, however, showed that Merrill Lynch lost $21.5 billion in the fourth quarter of 2008, requiring the government to subsequently provide it with an emergency $15 billion preferred stock investment through the Troubled Asset Relief Program.

Committee Chairman Rep. Edolphus Towns (D-N.Y.), claimed during Tuesday's hearing that the government did not force Bank of America to take the bailout. Towns noted that it was former Bank of America Chairman Ken Lewis who asked former Treasury Secretary Hank Paulson on Dec. 17, 2008 to intervene.

“That one phone call put everything in motion,” Towns said. “Lewis claimed that he believed Bank of America could back out of the deal with Merrill Lynch based on the Material Adverse Change clause in the merger agreement - the so-called ‘MAC clause.’ [Former Bank of America General Counsel Timothy J.] Mayopoulos was suddenly fired nine days later without explanation and replaced by a senior insider who had not practiced law in years.”

Mayopolous testified Tuesday that, “Based on information [that was] already disclosed to shareholders, a reasonable investor would have been on notice that Merrill Lynch might well suffer multi-billion dollar losses in the fourth quarter of 2008.”

During his prepared remarks, Mayopolous also denied involvement in Bank of America's approving Merrill Lynch to pay billions of dollars in bonuses to its employees. However, he did advise Steele Alphin, Bank of America’s Chief Administrative Officer, that Merrill Lynch, not Bank of America, should determine year-end bonuses for Merrill Lynch employees.

“I also advised Mr. Alphin, however, that it was appropriate for him to make clear to the Chair of Merrill’s Compensation Committee that it would be inappropriate for John Thain, Merrill Lynch’s CEO, to be paid a year-end bonus,” Mayopolous said. “My advice was not legal advice that such a bonus would be illegal, but rather my business judgment as to what would be best for the combined company.”

Bank of America’s President of Consumer and Small Business Banking Brian Moynihan said Tuesday he was proud of the role his firm has played in the economy “during this period of economic difficulty,” and that Bank of America's acquisition of Merrill Lynch helped prevent a further financial collapse.

“We have extended $759 billion in new credit since we filed our first report in the fourth quarter of 2008,” he said. “That represents almost $17 for every dollar of the $45 billion of taxpayer assistance to the Bank of America.”


Key U.S.-Russia Non-Proliferation Treaty May Expire Without Renewal, Say Foreign Affairs Experts

By Celia Canon- Talk Radio News Service

Charles D. Ferguson and Stephen Sestanovich, Senior Fellows at the Council on Foreign Relations, explained that the 1991 START non-proliferation treaty may not be renewed following the U.S.-Russia Summit this July.

“There can’t be an agreement unless there’s also a formal renunciation by the U.S of the missile defense plan. That’s rather unlikely to happen, and if the Russian stick to that line, the chances of arms control are [slim],” said Sestanovich.

START (Strategic Arms Reduction Treaty) was ratified in 1991 by Russia and the U.S in an effort to achieve a dramatic reduction in strategic forces such as warheads and inter-continental ballistic missiles (ICBMs) in the post-Cold War era.

According to the U.S. based Arms Control Association, “Russia claimed 4,237 total deployed strategic warheads under the terms of the 1991 START nuclear reductions agreement” while the U.S has 3,696 deployed strategic warheads.

“What has really agitated the Russians... is the American plan to deploy some rather basic elements of the missile defense system in Eastern Europe,” Sestanovich explained, referencing the Bush administration’s decision to install missiles at a base in Poland and to build a radar station in the Czech Republic. Both deals intended to protect Europe from “rogue states” such as Iran.

Ferguson added, “The [Obama] administration has a review of its missile defense policy on the way, and that makes it a little more difficult for them to reach any specific understandings with the Russian about this issue. They can’t offer certain kinds of assurances.”

President Barack Obama has recently agreed to halt military developments in Eastern Europe if Russia agrees to participate actively against Iran.

Ferguson countered Moscow’s accusations that a U.S presence in neighboring states is a serious military threat, saying “What we are looking at is a much smaller, much more modest missile defense system... There’s really no technical reasons for the Russians to be worried at this stage about missile defense as it is currently proposed.”

Iraqi Refugees need U.S. help, advocates say

By Michael Ruhl, University of New Mexico – Talk Radio News Service

America must invest more time, money, and human resources to help those displaced by the ongoing Iraq War, according to human rights advocates from the Washington, D.C.-based Refugees International.

The presence of 2.6 million displaced Iraqis persons is overwhelming to neighboring Middle East countries and is “undermining” to the social fabric of Iraq, said Ken Bacon, President of Refugees International, at a speech made today at the National Press Club.

President Barack Obama talked about displacement with Iraqi Prime Minister Nouri al-Maliki during his surprise visit to Iraq on Tuesday.

Bacon is happy at what is being seen as a distinct change from the “little attention” that the Bush Administration paid to Iraqi displacement.

It is estimated that since the U.S. invasion of Iraq in 2003, 2.6 million Iraqi’s have lost their homes and have fled other parts of the country. An additional 2 million have fled to neighboring countries, including Syria, Jordan and Egypt.

Bacon said that greater American and international support in receiving refugees and providing financial-aid can help stop the crisis.

Displacement of that many people “affects the whole region”, said Bacon, which results in educated citizens and specialized workers fleeing the country.

There are only 18,000 practicing doctors in Iraq, down from 32,000 doctors in 2002. There are more Iraqi doctors in Jordan than in Iraq’s capitol city of Baghdad, Bacon said.

Last year Democratic Senators Robert Casey (PA) and Benjamin Cardin (MD) introduced a bill to increase aid to Iraqi refugees and allow more of them to enter the United States. Since the FY2010 Budget has been approved by Congress, any appropriated funds to help Iraqi citizens would have to come through additional legislation, Bacon said.

A spokesman for Senator Cardin said it has not been decided yet if similar legislation would be introduced in this Congress.

Refugee International’s Field Report on the Iraqi refugee situation said that the Iraqi government is trying to keep more of its citizens from fleeing their homeland. It is feared by the Iraqi government that the existence of so many refugees tarnishes the image of overall security within the country.

The report also said Iraq violated international refugee laws in 2007 by asking Syria not to accept any more Iraqi refugees.

Many refugees have fears of returning home, the report says, because many of those that returned already have been killed.

Kristele Younes, an advocate with Refugees International, says that security is a major issue in Iraqi neighborhoods, with each little borough acting as its own walled off “fiefdom”.

Younes said that the United Nations is trying to place a tourniquet on the flow of persons out of the country by the end of the year, but significant challenges remain in Iraq, including budgetary shortcomings due to low oil prices, corruption within the government and sectarianism.

The Refugees International’s report on Iraq can be found here.

Continuity from Bush administration to new president assured

The Heritage Foundation held a discussion about the post-Bush transition period in response to Senator and Vice Presidential nominee Joe Biden's remarks expecting a crisis to occur within the first six months of an Obama administration. Giving their expert opinions were Dr. James Carafano and Lisa Curtis of the Heritage Foundation, and Clark Ervin of the Aspen Institute who was also the first Inspector General of the Department of Homeland Security.

Carafano began the discussion by expressing that he "[doesn't] actually think the government is particularly vulnerable in this transition period." The only continuity problems that may occur, he said, will be in the Department of Homeland Security (DHS) if an Obama administration comes to power. He continued with the thought that DHS would be a difficultly for the Democrats because it was created since they were last in power, so "they haven't been there" before.

Lisa Curtis is a Senior Research Fellow of the Asian Studies Center and contextualized the discussion by focusing on recent Afghan-Pakistan relations. She believes that lately the Taliban has been "emboldened" in the tribal areas of Pakistan where they have become de facto rulers and they are spreading into Afghanistan. The United States' response to this, she said, must be an increase in troops to the region because America must gain support of the local populations there to have any sway over the Taliban.

Clark Ervin concluded the discussion with a direct dismissal of Carafano's belief that the transition period is not a time of vulnerability. He called the transition a "heightened threat period" that needed to "close security gaps" that have been created since Sept. 11. Ervin said that another attack on American soil, particularly in regards to the current economic crisis, "would be even greater with a new attack", especially since America is already burdened by two wars.

Despite their differences, all three panelists agreed that the Bush administration was preparing to turnover their work of the past eight years and Ervin expected "joint table topics of the outgoing Bush team and the new incoming team."

Dems outline priorities on national security

Democrats criticized the Republicans for being weak on national security at the Progressive Policy Institute (PPI) forum. Sen. Evan Bayh (D-Ind.) said the Democrats need to develop more allies than the Bush administration has done. Bayh said that the U.S. needs "other people standing by our side in our national security interests."

Rep. Ellen Tauscher (D-Calif.) said Afghanistan was "strategically, the most important place in the world." She said that because of its lack of resources and structure, many terrorists have gone there to congregate and regroup. Retired Marine Corps Col. T.X. Hammes said the current U.S. mission in Afghanistan will never be successful until we develop a national security strategy. He also said that an influx of troops will not change the situation there if national security options continue to be "knee-jerk decisions."

The Bush administration "has failed to lead non-proliferation," Tauscher continued. There will soon be 500 nuclear power plants, and 40 will be able to make nuclear weapons on short notice, the congresswoman warned.

Reza Aslan, author of the book "No God but God: the Origins, Evolution, and Future of Islam," said that the U.S. is asking "Why do they hate us," when it should ask, "Who the hell are they?" A feeling has developed in the Middle East that the "war on terror" is a "war on Islam." He said that U.S. efforts in that region have radicalized the terrorist groups there.