Communism at work in America

I am troubled by the lack of discussion about economic tactics used by the government to control private companies. I hope everyone had a chance to look at the Wall St. Journal on Thursday and Friday. The cover story on Thursday was that of Ken Lewis’s testimony that the chairman of the FED and the Secretary of the Treasury effectively forced him to acquire a “sick” asset in Merrill Lynch. In order to discuss this we must first understand the background of this situation

In terms of economic power in the United States, Chairman of the FED, currently Ben Bernanke, as well as Secretary of the Treasury, Hank Paulson during the alleged intervention and currently Tim Geithner, hold the most power. It is also important to understand where these men came from before their current positions. Ben Bernanke and Geithner came as Presidents of regional banks for the FED and Paulson served as President of Goldman Sachs. This is extremely important because it may lead to the biases that these men have been criticized for; most notably Paulson. Paulson has been widely criticized for not responding harshly enough to the Wall St. firms. In my mind I can only justify this because he is currently making $196,200 as Secretary and I can guarantee you he took a more than significant pay cut to wield the power he currently has, so where do you think he is going now that his term is up in the White House? My guess is back to Wall St., the same Wall St. that he chose not to punish in the midst of all of the problems.

Understand the background is key to understanding the current situation, another one of these matters is the firing of Merrill Lynch CEO shortly after Bank of America took over Merrill Lynch. This is a huge deal because no one really knows what went wrong. In a story released today, former CEO John Thain says that the bonuses paid out were not his fault, but rather that of a collaboration with Bank of America CEO Ken Lewis and himself. No one really knows what happened, but the fact that all of the bonuses were paid out and the CEO was fired is fishy.

The communistic intervention that was the cover story last week was Ken Lewis’s testimony that Ben Bernanke and Hank Paulson forced him to buy Merrill Lynch after he discovered rising problems with the company. According to the Wall St. Journal, Bank of America discovered an additional 3 billion dollars in losses in a three day period before they acquired the company, this was the point at which they attempted to drop the acquisition. At this point, Bernanke and Paulson told Lewis that if he decided to not buy the company it would cause far too much trouble to the overall financial market. They knew this because the government let Lehman Brothers fail when they publicly acknowledged they shouldn’t have. Another firm falling would have been detrimental to the overall economy. Thus, they threatened to take over Bank of America and fire Lewis if he didn’t cooperate. This is a HUGE deal. This is illegal and personally, I believe everyone involved should be tried in court.

It makes sense that the government didn’t want anything more to happen to the market, but this is blowing up whatever boundaries there were with potential intervention in the private sector. The government has already fired a CEO in GM’s Rick Wagner, and apparently they were ready to do the same thing with Ken Lewis. Where is the line? This problem sets new definitions for the United States Economy. Are we no longer capitalistic? Are we no longer socialistic? We have been inching closer and closer to full blown socialism with each passing day of the current crisis and who knows where it is going to stop. I am upset to see it come to this, but it does make some sense of all of the things that have happened:

There will always be the question of how Paulson acts because of his ties with Goldman Sachs. If he forced Bank of America to assume 15 Billion of Merrill losses, how is Goldman going to fare? Further, does the bonuses paid out that were supposedly on the books at Merrill mean someone was trying to be paid off to keep quiet? This doesn’t seem like much of a stretch seeing the horrible financial state Merrill was in when they paid bonuses and the rising amount of losses. If the government can do something to this extent, the entire market should be worried. If this intervention of the government into the private sector is true, Bank of America shareholders should be able to sue the government, but this can only happen if they allow it which they almost certainly won’t. Further, the official statement that Lewis made with the Attorney General’s office of NY can be found here: http://www.oag.state.ny.us/media_center/2009/apr/apr23a_09.html

There are serious chunks of pages missing, what can we think about that?
19 pages missing between 13-339 pages missing between 42-5118 pages missing between 60-795 pages missing between 90-9651 pages missing between 99-151
The government only released half of the statements?

I don’t know what to think or where we are headed. Keep your eyes open.

Matthew James