Fallout: The Financial Crisis

Bernanke denies hiding information

Tamara Keith Jun 25, 2009
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Fallout: The Financial Crisis

Bernanke denies hiding information

Tamara Keith Jun 25, 2009
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TEXT OF STORY

Kai Ryssdal: This happens all the time when witnesses testify before Congress.

CHAIRMAN OF THE HOUSE OVERSIGHT COMMITTEE: Please raise your right hand…

But still, when Ben Bernanke rose to be sworn in this morning by the chairman of the House Oversight Committee, it was a little jarring. The Fed chairman was grilled, and I use that word intentionally, about the Fed’s role in the Bank of America Merrill Lynch deal from late last year.

Not long after the takeover was announced, it became clear Bank of America would be taking on a company in bad shape and getting worse. There’s been talk ever since that Ben Bernanke and then Treasury Secretary Henry Paulson strong-armed B of A CEO Ken Lewis into closing the deal.

And a couple of weeks ago Lewis told the committee that his job had indeed been threatened if he backed out. Today it was Bernanke’s turn in the witness chair.

Tamara Keith tells us from Washington that Mr. Bernanke said his hands are clean.


TAMARA KEITH: The first question came from the committee Chairman — New York democrat Edolphus Towns. It wasn’t a softball.

Edolphus Towns: Did you instruct Hank Paulson to tell Ken Lewis that he and his board would be fired if they backed out of the Merrill deal?

That would be Secretary of the Treasury Henry Paulson. Fed Chairman Bernanke made what would be the first of many denials.

FED CHAIRMAN BERNANKE: I did not instruct Mr. Paulson or anyone else to convey such a threat or message to Mr. Lewis.

Republican Dan Burton read from an e-mail a regional Fed president sent at the time Bank of America was threatening to pull out of the deal. The official had just talked with Bernanke who he said…

DAN BURTON: Also intends to make it even more clear if they play that card and then need assistance management is gone. You didn’t say anything like that?

BERNANKE: I don’t know if I did or not.

Burton said he’s been on this investigative committee a long time, and has heard plenty of people give answers like that.

BURTON: In order to keep people from perjuring themselves they couldn’t remember anything. Are you sure you can’t remember?

BERNANKE: I’m sure I can’t remember.

The committee still wants to hear from Paulson, now a former Treasury secretary, and others. For his part, Ben Bernanke said he doesn’t regret anything about the whole transaction. He said it protected the economy and at a time when the financial system was hanging on by a thread.

In Washington, I’m Tamara Keith for Marketplace.

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