Get the hell out of my business

If you had any doubts that the government should get their dirty beaters off the economy (you shouldn’t), recent evidence should put those doubts to rest.

Bank of America Chief Executive, Ken Lewis, recently testified under oath to New York’s attorney general that Federal Reserve chairman Ben Bernanke and then-treasury secretary Hank Paulson instructed him not to disclose the horrid financial condition that Merrill Lynch was in to shareholders.

Keep in mind that this was prior to Bank of America initiating the acquisition of Merrill Lynch. Sensible investors in the company would have made it quite clear to the board of directors that such a merger was not to happen if they knew of Merrill Lynch’s condition.

But once the merger was initiated, Merrill Lynch’s condition severely worsened. Lewis wanted to execute what’s known as a Material Adverse Change (MAC) clause in order to cut the company’s losses.

A MAC clause basically allows the acquiring or merging company (in this case Bank of America) to call off the acquisition or merger with the target (Merrill Lynch) if the targets situation severely changes. Certainly, this was the case.

However, Lewis further testified that he was instructed not to execute the MAC clause and that if he did, the board and management of Bank of America would be changed out.

Of course, this assault on stockholders in the financial sector isn’t anything new. Citigroup is currently working on converting the preferred shares the government owns into common equity. This activity dilutes the value of current outstanding shares to investors.

There’s also a good chance it’s going to hurt taxpayers in general (http://tinyurl.com/d7gdc6).

So let me get this straight… the administration wants to engage in activities that actively harm investors, and yet Obama wonders why there’s a “confidence gap”?

I find it repulsive that the government likes to claim that their interventionist activities are needed to protect investors and save the economy when an even basic understanding of finance and economics will show that it does nothing but harm investors and the economy in genera.

Again, I find myself wondering if members of the current administration are extremely inept or are truly malevolent.

2 comments for “Get the hell out of my business

  1. April 27, 2009 at 8:43 am

    Maybe a little of both?

    –Nick
    http://www.RightMichigan.com

  2. April 27, 2009 at 8:48 am

    Wouldn’t surprise me.

Leave a Reply to Nick Cancel reply

Your email address will not be published. Required fields are marked *

Time limit is exhausted. Please reload CAPTCHA.

Loading Facebook Comments ...