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Federal Reserve Bullying Banks?   June 10th, 2009
We'll know more soon, but it looks that way       


More observations...

The financial crisis continues to take turn after turn to the surreal--now with what appears to be accusations that the Federal Reserve bullied Bank of America into completing its acquisition of Merrill Lynch.

Bank of America CEO Ken Lewis heads to Capitol Hill on Thursday, and he's likely to be grilled by lawmakers about the government's role in ensuring that the bank complete its controversial merger with Merrill Lynch.

According to emails released Wednesday that pull back the curtain on heated negotiations, Federal Reserve Chairman Ben Bernanke had suggested to another Fed official that "management is gone," if BofA managers tried to flee the deal and later on needed further government assistance...

He is expected to be asked specifically about whether the Federal Reserve and other government officials pressured Bank of America (BAC, Fortune 500) into completing the merger even after BofA realized how badly Merrill Lynch's fourth-quarter losses would be...

Paulson said that Lewis and the BofA board would be replaced if they sought to end the merger, which Paulson viewed as integral to the health of the U.S. financial system. Paulson told New York investigators that he threatened Lewis' job at the behest of Fed chief Ben Bernanke.

If these accusations are true then the situation has become completely insane.

We already had the president of the United States firing the CEOs of auto companies, completely ignoring bankruptcy law and giving bondholders a raw deal, forcing Chrysler into the arms of Fiat, giving ownership of auto companies to their unions, stipulating salary caps on executive pay, arbitrarily closing automobile dealerships under questionable criteria, forcing banks to take government funds that they don't want, and refusing (until recently) to let them pay the money back.

And now we have emails that would suggest that Federal Reserve Chairman Bernanke effectively threatened the CEO of Bank of America to go through with a major purchase of a failing financial company that it may very well would have preferred not to have purchased.

There seems to be a lot of arbitrary exercise of government power lately... dare I say abuse of power... And abuse of powers that don't seem to be conveyed to the government under the Constitution.

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