It's amazing how our largest bankers are in the process of rewriting history to show that, at worst, they experienced a minor hiccup last year and never really needed any of the assistance provided by the government. This is obscene. Although I believe that these banks should have been temporarily nationalized in one fell swoop, there is little doubt that many of them would have failed were it not for the money and guarantees provided by the government. Jack McHugh offers some solid commentary on
Bank of America's latest ploy to avoid paying the U.S. taxpayer for the government guarantee they clearly benefited from following their announced deal to acquire Merrill.
Jack McHugh:
Your word is your bond; a deal’s a deal. We all learn these lessons well before we become adults and pursue various ambitions. Even bankers live by this credo, especially when they are on the collecting end of a contract. Now comes Ken Lewis and the Bank of America (
), looking the American people straight in the face while claiming a deal isn’t a deal without a signed contract. I’m referring to the U.S. government guarantee of the assets BAC assumed after acquiring Merrill Lynch. Negotiated in the dying light of the Bush administration in January of this year, BAC trumpeted the news during a press release on January 16, containing, among other things, an awful Q4 earnings report (see stories below). The assets receiving this taxpayer-funded backstop amounted to $118 billion. It cushioned the blow of the earnings report and helped buy BAC the time it needed to raise fresh equity (which it did in May).
Coffers replenished, Mr. Lewis and his behemoth bank are trying to claim there is now no need for this guarantee, and besides, no full contract was ever executed. (
) wants to renege on paying the $4 billion it owes the taxpayers for the backstop, line of credit, insurance policy, or whatever we want to call it. “We didn’t draw on it, so we don’t owe anybody anything” seems to be BAC’s defense. I wonder if a similar defense would work if I decided not to pay my insurance premiums this year because my house has yet to burn down. And yet, the Charlotte-based banking house Mr. Lewis helped build was indeed smoldering, if not on fire back in January when he agreed to the deal and announced the following:
'In view of the continuing severe conditions in the markets and economy, the U.S.
