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.

The Question On Everyone's Mind: Is the Stimulus Working Yet?

By Annie Berman – Talk Radio News Service

It is still unclear if the American Recovery Reinvestment Act (ARRA), also known as the stimulus bill, is helping states create and retain jobs, despite the current 9.5 percent unemployment rate.

This is the third in a series of hearings the Oversight and Government Reform Committee has held to discuss the ARRA, specifically to review the state and local uses of Recovery Act funds and the Government Accountability Office’s second bi-monthly report of those allocations.

According to Robert Nabors, Deputy director of the Office of Management and Budget, the stimulus bill is having a positive impact.

“The Recovery Act is making significant resources available to states that are struggling…funding has relieved pressure on state budgets, allowing them to provide better service and avoid job cuts,” Nabors said.

Nabors also stressed that states should not rely on stimulus money in
the long term.

“We always view the Recovery Act as a short term effort. The President has been very clear that we need to get the economy jump started. We need to expend resources now to actually get them started. But over the long term, the funding levels that are contained within the Recovery Act should not be thought of as permanent,” said Nabors.

The three governors that testified at today’s hearing maintained that direct aid to states provided by the stimulus plan has greatly helped their states’ economies through job creation and projects such as highway restorations and solar energy panels for buildings.

“Things are happening,” said Pennsylvania Gov. Edward Rendell (D). “Construction and manufacturing. It’s working. And the good news is it’s going to get better…you are going to see a huge impact. I think the stimulus is going to work. Any judgment on it is premature. Let’s see how it works. I’d like to see a second stimulus dedicated solely to infrastructure.”

Rep. Darrell Issa (R-Calif) voiced strong opposition to the possibility of a second stimulus bill, even though he voted in favor of the first.

“The U.S. economy lost 433 net jobs in June bringing the unemployment rate to 9.5%,” said Issa. “These job losses pump on the heels of other declining economic indicators that bring total American job losses since President Obama took office to 2.6 million…fool me once shame on you, fool me twice, shame on me.”