Kenneth Lewis of (now) Bank of America told Darrel Issa's Congressional committee a couple weeks ago that Hank Paulson and Ben Bernanke pressured him not to back out of the Merril Lynch acquisition deal.  He claims they threatened him that if he backed out after discovering that Merril's books showed insanely high losses, they would replace him as CEO.

Bernanke told the committee that while he was "concerned" that Lewis wishing to invoke a MAC clause, Or Material Adverse Change clause, would spell trouble. Backing out would send shock waves through the financial system, but they, of course never threatened him.

According to a recent Frontline story, Lewis had a second-fiddle complex; he was not an heir to the financial oligarchy, and when he was in a position to buyout Merril, he pounced.  He would, heretofore, be the Biggest Banker in the U.S.  It is unclear whether or not his people exercised due diligence in scouting their books.  When he did find the horrifying balance sheet, he "neglected" to tell his shareholders, who signed off on the merger at his request. He now claims he was instructed to not mention this info to his board and shareholders.

According to investigative reporters, all nine bank heads who were called in to the Big Financial Meltdown meeting with the Fed and Head of Treasury, were essentailly told they would accept x-billion in TARP money, or there would be leaks about the viability of their institutions.  Apparently, all the banks would need to take the money in order to hide the fact that some actually needed recapitalization;  and to prevent more Bear Stearns-ish collapses.  (As soon as Wall Street heard Bear took government money, their stock tanked, and tanked some more, until they failed.) 

Bernanke's voice during his testimony was shakey at times.  I wish lying experts could have weighed in on his eye shifts and voice warbles; the same for Lewis's testimony.  Bernake also maintained that the Fed and Treasury "did all we could legally do" to save Lehman Brothers, but "there were just no takers" for an acquisition there, nor any TARP money yet.  We all know of the fierce competition between Paulson at Goldman Sachs and Lehman Brothers; many people have claimed that is essentially why Lehman was allowed to fail.

Why didn't Mr. Financial Wizard Lewis discover what was on Merril's books?  Did Bernanke not give him enough time, or was he too eager to become King of the Banks?  Did he think the billions in guarantees the Fed offered him were enough at first glance, then reconsider?  And what, exactly, does he want now? 

Which of them do we believe?  And most importantly, what lessons do we learn?  That we have zero influence over any of it.  Obama's financial team is just like Bush's financial team at the top.  The main person I have confidence in is Elizabeth Warren, head of the TARP watchdog committee.  She has constantly complained that her staff is too minimal, and that there is simply no transparency whatsoever.  So she skirmishes constantly with the Fed. 

Sheila Bair, head of the FDIC, has some mettle, also, and has done some truth-telling here and there.  I am enough of a feminist to enjoy that it is two women who seem to have the most balls in speaking truth-to-power in this whole financial debacle.

And I agree with Ron Paul (but for different reasons):  INVESTIGATE THE FED.

And don't dick around with cutesy re-regulation, and not just fluff about consumer credit wah-wah. Congress needs a Pecora-like commission to explore all that went wrong, and put in place some meanigful reform.  Yep, it's closing the barn door after the horse has bolted, but maybe some regs will help to prevent the next bubble-burst cycle for awhile.