It's painful to watch the continuing circus act in Washington. Moronic lawmakers once again can deflect any personal complicity in the financial crisis by beating up on the schlub of the day. Today that prize goes to our Federal Reserve Chairman, Ben Bernanke, or as I like to call him, "BB".
The House Committee on Oversight and Government Reform brought BB before them under the guise of questioning him about the shotgun marriage between Bank of America and Merrill Lynch. Yesterday, California congressman Darrell Issa, the senior Republican on the committee, said the Fed "engaged in a cover-up and deliberately hid concerns and pertinent details regarding the merger from other federal regulatory agencies." COVER UP--them's fighting words!
The allegations stem from a December 21, 2008 email between Federal Reserve Bank of Richmond President Jeffrey Lacker and other Fed employees. In it, Lacker notes that Bernanke planned to tell Bank of America that "management is gone" if it bowed out of the Merrill deal and later needed more government money.
This seems totally believable, doesn't it? Go back to that time and remember that the financial system had just barely avoided total collapse. The last thing the government needed was another Lehman-like failure. I could imagine a scene where BB stared down Bank of America CEO Ken Lewis and basically said, "Hey Ken--you know that you wanted this deal. You were dying to stick to the New York investment community and so you snatched one of its prized possessions--the "Thundering Herd" of Merrill Lynch. Don't tell me know that you don't want to do it. If you are so worried, just know that Uncle Sam will not be here for you if things go sour."
Let's assume that BB and then-Treasury Secretary Henry Paulson acted like big bullies and let's also assume that Lewis had real concerns about doing the Merrill deal: Why didn't Lewis have the guts to go to his shareholders and lose his job? Isn't that what fiduciary duty means--to put the interest of your shareholders before your own interests? In other words, lawmakers may have grilled the wrong wiener today.