Waters Defends Herself Against Charges

Rep. Maxine Waters (D-Calif.) held an unusual press conference this morning with reporters inside the Capitol to plead her innocence over ethics charges against her and her chief of staff.

The 90-minute roundtable was held in an “undisclosed” location inside the Capitol building, and was limited to members of the press who received invitations to attend from Waters’ DC office. During the press conference, Waters defended herself against accusations by a House ethics panel that she used her influence to secure bailout funds in 2008 for a bank in which her husband owned a significant amount of stock.

The bank, OneUnited, is a small minority-owned firm based in Boston that suffered heavy losses in 2008 due to its investment in Fannie Mae and Freddie Mac. Shortly thereafter, bank executives asked the U.S. Treasury Department for $50 million to stay afloat, and ended up receiving $12 million in Troubled Asset Relief Program (TARP) funds.

The Ethics committee’s statement of alleged violations (SAV) against Waters includes charges that she “violated the letter and spirit of House rules and federal regulations designed to prevent lawmakers from using their posts to benefit themselves or giving the appearance of conflicts of interest.” Nonetheless, Waters claimed today that she did nothing wrong.

“Neither my staff nor I engaged in any improper behavior; we did not influence anyone; and we did not gain any benefit,” she said. “This case is not just about me. This case is about access, about access to those who are not heard by people in power.”

Waters said she arranged the press conference to clear up any “misinformation” about her case. She said she had not spoken about it beforehand with any of the House Democratic leadership, some of whom were visibly annoyed with Rep. Charles Rangel (D-N.Y.) for publicly discussing his own alleged ethics violations earlier in the week.

Click here for more of Rep. Waters’ response to the ethics committee’s investigation.

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.”


Nervous Paulson Gets Grilled On Controversial Bank of America-Merrill Lynch Merger

A visibly nervous Henry Paulson, former US Secretary of the Treasury, testified before the Oversight and Government Reform Committee to defend his decision to harshly warn Bank of America CEO Ken Lewis that backing out of the merger with Merrill Lynch, was the best thing to save the American economy.

Though the unemployment rate is currently at 9.5% and is expected to rise, Paulson continued to affirm that if Ken Lewis were to invoke a Material Adverse Change Clause (MAC), which would stop the merger, it would have been detrimental to the economy.

In the first two hearings held to discuss the controversial merger, it was concluded that Ken Lewis must have known about the major fourth quarter losses that Merrill Lynch suffered after the shareholders voted to go ahead with the merger, which would explain his attempt to invoke a MAC clause. Rep. Dennis Kucinich (D-Ohio) asked how Paulson could shoot down the MAC clause (a legal action) and ignore the possible illegal action of Lewis’ withholding vital information from Bank of America shareholders.

“Nothing in Mr. Paulson’s testimony today justifies the Government’s decision to ignore evidence that Bank of America withheld information from its shareholders about mounting losses at Merrill Lynch before the crucial shareholder vote on December 5-- a potentially illegal action,” said Kucinich in his opening statements.

In response, all Paulson said was that he simply did not see any illegal actions.

Rep. Jim Jordan (R-Ohio) said that there is a “clear pattern of deception and intimidation” in terms of the relationships between Lewis, Paulson, the merger and U.S. Federal Reserve Chairman, Ben Bernanke.

“People need to see this situation because it sheds light on where we are headed...it is important we see what happens when you give this kind of involvement to the federal government,” said Jordan.

It was revealed during the hearing that Paulson did in fact share information about the merger with U.S. Securities and Exchange Commission Chairman, Christopher Cox and FDIC Chairman Shelia Bair. In his closing statements, Chairman Edolphus Towns (D-N.Y.) said that he will invite them to testify on their involvement with this merger after the August recess.