Thursday, January 15, 2009

Don't Hate the Playa - Hate the Game

In case you're unaware, today's atrocity is that Hank Paulson and his boys allegedly promised Ken Lewis, CEO of Bank of America, more government money a month ago, after Lewis engaged in financial terrorism by threatening to walk away from his horrendous deal to buy Merrill Lynch (which I wrote about a full FOUR months ago!). The government supposedly feared this would roil the markets, and made a secret handshake with Lewis. The details will be released with BAC's earnings next week.

Instead of writing a rambling 5000 word rant on how absolutely insane this latest Bank of America bailout story is, I'm going to give you two links which I think have already covered the point well:

1) Clusterstock:

BAC CEO Ken Lewis decided to buy Merrill Lynch. No one forced him to do it. If it was such a bad decision that it threatened to kill the firm, he should resign in disgrace (or, if he refuses to do so, he should be sacked). It's not as though he didn't have plenty of warning.

If Hank Paulson promised Bank of America more money, meanwhile, both he and BAC should have disclosed this immediately. This is highly material information. It's also NOT a private deal. It's a government deal. The public deserves to know about this instantly.

Taxpayers should be furious at how they and their money are being treated by a government that supposedly exists to represent them. Bank of America did not buy Merrill Lynch for the good of the country: It bought it because Ken Lewis thought, wrongly, that he was getting a deal. Ken Lewis should be held accountable for this. Hank Paulson, meanwhile, should immediately disclose exactly what this secret deal was, when he made it, and why.

2) Barry Ritholtz

So the horrific deal Citibank cut with Treasury was a blueprint, an example for the next foolish investment — and here it is: Bank America, a supposed good bank, that couldn’t wait to get their hands on Merrill Lynch, now a bad bank.

And now that we all see what a terrible decision that was by supposedly sophisticated private sector players, well, then rather than take the hit, BoA has their grubby hands out begging for some taxpayer loot to paper over their idiotic decision-making. First they bought that giant manure pile CountryWide, and now they own another stinking pile of enzyme-free donkey-fazoo, Merrill Lynch.

I say, fuck ‘em. Why do I have to pay for their bad judgment?

Enough already! Fire Ken Lewis, he’s a bum. He’s made several horrific acquisitions, and needs to serve up his head on a platter for his god-awful lack of judgment. Toss out the entire Board of Directors, too, as they all suck. They’ve bankrupted the company, its time they all need to go.

While I certainly agree with both articles, I think Barry is misplacing the blame a little bit. Ken Lewis is just a playa in this scam - Hank Paulson is the one who keeps doling out the dough - can you blame Lewis for asking? The blame lies with Paulson.

And before anyone gets any crazy ideas about how we HAD to bail out BAC because they are too big to fail and if they walked away from MER it would have destroyed the financial system: let me explain one thing: as long as the government guarantees all deposits in bank accounts (which they haven't done yet, but could easily do!) - the financial system would be ok. Failed banks can be easily replaced with new, untainted capital, which would then be available to lend. Contrast this to the current situation, where blood (money) is being pumped into sick patients (banks).

Ken Lewis (CEO of BankAmerica) is one of the worst deal makers in the United States. He bought Countrywide, and then Merrill - each of which he overpaid drastically for, and each of which threatens to poison his firm. Fortunately for him, there is a worse deal maker with even more money watching his back: Hank Paulson. The bad news for America is that Paulson is spending OUR money.

I'll have more when the details of this latest thievery of taxpayer funds are revealed - if my head doesn't explode.


1 comment:

Anonymous said...

I do kinda like the fact that Larry Flynt is asking for five large on behalf of the adult entertainment industry. That's nothing if not cheeky.