Ken Lewis just can’t seem to get his act together. At least Vikram Pandit, head of Citigroup (NYSE: C) – which is arguably in similar to worse position as Bank of America (NYSE: BAC) – has had the sense to stay out of the newspapers for a while, keep his head down, and at least keep up the appearance that he’s trying to grind it out and do things right this time. Lewis on the other hand, from his standoffish demeanor during the most recent hearings in front of the Finance Committee, to his initial claims of pure ignorance regarding the Merrill Lynch bonuses and balance sheet situations, to the current controversy, where his new defense about Merrill is “the Government made me do it and made me keep it ‘hush hush.'” (Get the Full Story here as reported by The Wall Street Journal Online.)
To quote Jack McCoy in cross-examination in one episode (or one hundred episodes) of Law & Order, “Were you lying then, or are you lying now?!?”
I think it’s safe to say that many are “skeptical” about the absolute truth of Lewis’ statements, but it’s not hard to believe that Paulson and Bernanke at the Treasury and the Fed may have had a hand in how things played out, and certainly are responsible for the way some of this information has come out, which is sloppily, and non-desirable-press inducing. At the very least, Lewis has deflected some of the spotlight for the moment, and has thrown two of the most prominent figures in this entire “recovery” process directly under the wheels of the Political “Straight-Talk Express.”
Regardless of whether you think it was a good or a bad move on his part, this scenario is very similar to what those from “the inner city” or “the hood” might call “snitching.” That being the case, I would think that many from “the hood” would consider what Ken Lewis has just done as being a “bitch-ass-move.” I tend to agree with that, but feel it’s also noteworthy to point out that corporate rules are obviously different from “hood” rules. No matter what, usually when there’s a crime to be sorted out with multiple suspects, the one that talks first usually gets the best deal. From that perspective, Lewis’ move is a smart one, and Paulson and Bernanke would be idiots for not revealing this information themselves, before Lewis, especially since they’re government officials which would potentially have shielded them from the prospect of “wrongdoing” on their parts being that they would have been the ones doing their jobs by reporting it. Add to that, the fact that Paulson (before) and Bernanke (now) can be considered the “cops” of the TARP/TALF/PPIP framing and administration, and it can be argued that although Lewis was snitching, he was snitching on cops, so for that, he would get a pass from the orginal bitch-ass nature of his snitching actions.
At the end of the day, I’m not too moved by the story itself. Bernanke’s already been on record as having been against the Merrill-Bank of America deal, but not feeling as though there was much of an alternative if Lehman is any indication of what could have happened. Paulson was always a shady looking character in my eyes from the beginning, and he’s part of the Wall Street wrecking crew anyway, so I wouldn’t be surprised if Paulson, after setting up the deal and seeing that there would be these types of problems, told Lewis to blame it all on him. Think about it. John McCain had already made his “economy is fundamentally sound” comment in the face of the Lehman collapse, so Paulson had a pretty damn good indication right there that he probably wasn’t going to be Treasury Secretary for much longer. If that’s the case, he could be pretty safe telling Lewis “hey, blame this bonus and balance sheet stuff on me if things get really tough. It won’t be me that has to give that speech. I won’t even have to say anything about it at all. That’ll be on the new guy.”
Now I’m not suggesting that Bernanke is completely innocent in all this. He’s at least partly responsible for the ugly, sloppy way this information and the details of these deals have come to light, and that may be being generous as well. Ultimately though, Bernanke has come across as being more up front and forthcoming, therefore more credible than either of the other two characters involved in this headline grabber. Net net, this is a losing situation for Lewis. He reveals more of his own character flaws (another euphemism) in this scenario than anything. More and more, as the story unfolded yesterday afternoon, the whole thing reminded me of a scene in a fairly old movie – many from “the hood” would consider it a hood-classic – New Jack City.
Nino Brown (Wesley Snipes) runs the murderously bloody CMB, a drug-dealing organization, holding a Central Harlem Housing Project and its resident’s hostage as its base of operations. After being caught by rogue cops, and witnesses of the organizations dealings step forward, the following court scene occurs. (*Spoiler Alert*)The magic of this clip comes when Nino himself takes the stand, explains his reasoning, and then pulls a move that proceeds to turn the trial into a media circus. Sound familiar? I’ve transcribed my own Ken Lewis translation below the clip. Once the judge calls for “order in the court,” that’s a good point to stop the video and read the translation. Then continue to watch the end…if of course you don’t mind spoiling it and somehow haven’t seen this instant classic already.
“This thing is bigger than Ken Lewis. This is Big Business. This is the American Way!…I wanted to get out [of the deal with Merrill Lynch]. They threatened to [take my job.]”
NY A.G. Andrew Cuomo:
“Who are you talking about [Mr. Lewis]? What They?”
“They!Look at [them! Hank Paulson and Ben Bernanke!] That’s right, the educated brother[s] from the bank[s! They’re] the real heads of [BAC], the brains behind the whole thing! I told you, this thing is bigger than [Ken Lewis], and I got a list of people! If I’m going down, I’m taking a whole lot of people with me!”
If the end of the movie is any indication of what could happen to Ken Lewis, I’d say the days in his current position at the helm of Bank of America are numbered.