The Truth Comes Out

The truth continues to seep out... great Americans like Henry Paulson are being persecuted by a bunch of cowards whose IQ's are inversely related to their egos (and their egos are famously high).

Today, July 16, Congressmen and Congresswomen railed Paulson for the action he took to fight the largest recessionary forces since 1933. Defending himself against accusations from Bank of America CEO Ken Lewis, Paulson made many enlightening statements. Initially, Paulson threw the Committee a curve ball when he admitted to telling Lewis that the Federal Reserve had the authority to relieve Lewis of his position if he enacted MAC. MAC (Materially Adverse Change) is a clause that says that once a company agrees to purchase a company, it can only back out of the deal under certain circumstances.

One could tell this was a curve ball because each Senator asked the same question: "Did you threaten to fire Lewis if he enacted MAC?" But this question needed to be asked only once because Paulson admitted to... what exactly? Well he informed Lewis that the Fed had the authority to remove him... a law that Congressmen approved! Clearly they did not expect Paulson to be so honest and so innocent at the same time. Of course the Secretary of the Treasury can inform someone of the law- that's his job. Clearly this blame game needs to end and Bernanke and Paulson need to be cleared of wrongdoing. As Ken Lewis himself said, "They were forceful, but I don't believe they acted illegally."

Some may think that even if Paulson only informed Lewis of the law, he should not have done even that. But think about it. Lewis, a terrible CEO in my opinion, SIGNED A CONTRACT to purchase Merrill Lynch. The conditions stated in the MAC clause, which is a standard clause that many mergers utilize, did not include worsening market conditions. This is because it takes a long time for mergers to go through (six months or so), and it would be stupid if a side could back out once they realized they made a bad investment. Additionally, it was several days from the time the contract was signed to the time Lewis questioned the deal, and the those several days could have been spent finding a new partner for Merrill Lynch.

Anyways, the Senators continued to embarrass themselves. One Senator from Ohio berated Paulson for how bad things were in her state. Paulson said that he realized things were bad, but said they would have been worse had TARP not passed. To this she answered, "If that's your answer, its not good enough." To this Paulson could easily have responded: "Well that's fine, but where was your plan? Where were you when I was planning and making the hard decisions? Show me one sentence from a plan that you put forward to save your state." He could have gotten up and walked out of the hearing in disgust, if you ask The Bernanke Files. Lets analyze this for a second. First, if she is mad that TARP didn't work, wouldn't it make sense that she had a plan that was better? In reality, she didn't have a plan and still doesn't have a plan. None of the Congressmen do. They will continue to attack the smart officials that get the job done... that is until another shock hits the system and they go running back into their little holes, hoping intelligent people like Paulson, Bernanke, Geithner, Hoenig, Kohn, Plosser, Fischer, and (dare I say it) Bush Jr can jump in and save them once again.