Paulson Did Threaten Bank Of America CEO Ken Lewis

Paulson says told BofA's Lewis Fed could oust him (7/15/09 Reuters UK)

"WASHINGTON, July 15 (Reuters) - Former Treasury Secretary Henry Paulson says in prepared congressional testimony that he told Bank of America Chief Executive Kenneth Lewis the Federal Reserve could oust the bank's management and board if they walked away from a planned merger with Merrill Lynch.

"Paulson also said in testimony prepared for delivery to the House Oversight and Government Reform panel on Thursday that he was never instructed by Fed Chairman Ben Bernanke to indicate to Lewis any actions the Fed might take. (Reporting by Mark Felsenthal; Editing by Jan Paschal) "

So Secretary Paulson did threaten Bank of America CEO after all not to walk away from Merrill deal. Something doesn't feel right: the US Treasury Secretary threatening a publicly traded national bank with an action to be taken by privately-held institution (the Federal Reserve) which is not answerable to the government and the bank capitulates.

Mr. Lewis should have called Paulson's bluff. Instead, he and his board failed in their fiduciary duty to the shareholders of Bank of America.

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