This Is What You Get For Cooperating with the Government
Ken Lewis gets his payoff for knuckling under to Paulson and Bernanke on the Merrill Lynch acquisition
Kenneth Lewis, outgoing chief executive of Bank of America Corp., will get no salary or bonus for 2009, according to people familiar with the matter, the biggest Wall Street name thus far to come under the thumb of the government's pay czar.In fact, Mr. Lewis will have to repay the North Carolina-based bank more than $1 million in salary he has already earned.
The move was demanded by Kenneth Feinberg, the U.S. Treasury Department's special master for compensation, and was agreed to by Mr. Lewis and the bank.
After forcing Lewis to deal fraudulently with his shareholders, they cut his pay to zero. Nice. Lewis will do fine, he has a nice fat retirement, but it is still a pretty scary development for those of us who still care about contracts and individual liberty. Just ask yourself - what objective standard did Feinberg apply? Can't come up with one, can you?
Mesa Econoguy:
The really disturbing thing about all this was he did exactly as he what he was told to do by government, albeit different arms of government.
If Cuomo really wants to learn what Ken Lewis knew, he should subpoena Treasury & Fed officials. They were equally involved with this deal.
The upshot is, as we get more financial (and other) regulation, those regulations will be 1) contradictory, and 2) non-insular from legal and financial consequences. This is already having a chilling effect in the financial industry.
More here.
If I were Lewis, I’d get the hell out, and write a tell all book about how screwed up all of the regulatory agencies are/were in this mess. And make several million in the process.
October 15, 2009, 4:29 pmBrad K.:
@ Mesa Econoguy,
Actually, I was thinking about Lewis should get out - of the US. There must be somewhere in the world for corporations to relocate to get out from under the US thumb, somewhere that people are looking for work, somewhere that the government isn't in the process of sliding from Democracy to dictatorship.
Because one thing is sure. Obama and company sure seem intent on shutting down or shooing off American business . . . and jobs.
- if the Feds know what Lewis knows, shouldn't that information be available under the Freedom of Information Act?
October 15, 2009, 5:14 pmPeter:
This is really amazing as I was just reviewing federal law today on employee compensation. It specifically states that no company can deny an employee compensation of any form that he has already earned. Changes in compensation can only be prospective. I haven't read the details of lewis' case but unless the government told him to accept the deal and go quietly or go to jail then Lewis has a very good case for suit against Bank of America. After all unless I am mistaken the government does not technically "Own" Bank of america and unless the Banking or compensation czar has been given the power by congress an the president (ie by new law) to override existing law then his compensation can't be taken from him.
October 15, 2009, 5:32 pmMesa Econoguy:
Brad, sorta.
Asia is most favored current financial destination, but folks are reluctant to go that far. Lewis’ career is done, and he’s more than comfortable, but that doesn’t alter the current draconian financial environment. Plus, Bank of America....could you really relocate that? (Would be a hell of a statement, agreed)
FOIA, nope: see Fed Refuses to Disclose Recipients of $2 Trillion
See also:
October 15, 2009, 7:13 pmKeeping the Pay Police at Bay
Mesa Econoguy:
Peter,
BAC is a publicly traded company, but as a Fed member bank, is subject to all rules & regs of Fed oversight. So yes, indirectly, they are de facto (if not de jure currently) “owned†by the gov’t, ipso facto.
And if that were not the case, government would still find a way to weasel into their balance sheets.
October 15, 2009, 7:19 pmnom de guerre:
lewis sat down to dine with wolves, so he really shouldn't be too surprised at this. can't help but notice, though, that our special paymaster czar seems to be ignoring goldman sachs, even though they're on pace for a record compensation year. (frontrunning the entire market will do that for ya, i guess.)
how very odd. ah, well. probably just a coincidence.
October 15, 2009, 7:57 pmJohn Hitchcock:
The ObamaNation told Lewis "play ball or we'll destroy you" so he played ball ... and they still did their best to destroy him.
October 15, 2009, 11:56 pmTony:
This is what everyone voted for...This is Change...they are going to change the way Companys are run....Thay are going to Change your Health Care if you like it or not....and much more Change is going to come...OH BOY!
October 16, 2009, 5:23 amRoss:
I'm surprised no one has commented on the fact that he was required to return all salary and bonuses from last year. At a minimum, the Federal Government has now broken their own laws regarding minimum wage, haven't they?
From Wikipedia:
October 16, 2009, 6:50 amSlavery is a form of forced labor in which people are considered to be the property of others. Slaves can be held against their will from the time of their capture, purchase or birth, and deprived of the right to leave, to refuse to work, or to receive compensation (such as wages).
Methinks:
At a minimum, the Federal Government has now broken their own laws regarding minimum wage, haven’t they?
The government and all of its politicians and enforcers are above the law. Where Czars or commissars EVER subject to the law?
The disturbing take-away is that we no longer have Rule of Law in this country and the country is still so powerful that it can crush its citizens all over the world. In the past, I've always cheered U.S. power. Not anymore. Not in its current state.
October 16, 2009, 8:44 amWalt:
The entire affair with TARP and the banks was disgusting from the start. My guess is that so many sub rosa deals have been done in this mess and we have very little idea of what the real story is or was. Diving into legal technicalities misses the larger immoral aspect. As someone else said, Lewis made a deal with the devil. The Fed nationalized an(other) industry, but wants us to think they only partially did so. Like being pregnant, you can't be a little nationalized. Lewis, et.al. are smart enough to know that. He lost, apparently. The mystery to me is why he stays on? Keeping the CEO chair, he allows himself to be posterized as the bad banker. Altruism?
October 16, 2009, 9:05 amMethinks:
nom de guerre:
lewis sat down to dine with wolves, so he really shouldn’t be too surprised at this.
Let's be clear about this: a gun was pointed at Lewis' head by the wolves he sat down with. He didn't want to buy Merrill.
October 16, 2009, 10:31 amnom de guerre:
methinks:
if lewis really didn't want to buy merrill - and yes, i'm aware he didn't - then he should have nutted up and given the paulson/bernanke crime syndicate the finger. CEO's are forever blathering on about how tough and hard-minded they are (see: anything ever said or written by jack welch) and how "lunch is for wimps" and all that. lewis quivered, and stammered, and caved in like the little bitch he is.
all he had to do was say "no". either way, he gets no pay for 2009. but had he said no, he'd have been doing his job to protect the stockholders and their interests, as well as making a believable claim to having a set on him. now? not so much. BTW, i betcha there's a reason they came calling on HIM, rather than buffet or blankfein: it's because predators can smell fear - which lewis was full of. screw 'im. he accepted a *horrible* deal for his company, his shareholders, and himself, all because he was **afraid** of losing his cushy job. "i'll still get overpaid, right? you guys won't mess with my bonus, right?" and, predictably, the wolves he was dining with assured him all would be well.
surprise! now, not only does the whole financial world know he's a chickens**t, now he's getting raped live on national TV. ken lewis: dealmaker extraordinaire.
October 16, 2009, 1:35 pmBruce Oksol:
I don't think this is the end of the story. Ken Lewis is now very, very free to tell all. I hope he writes a book.
October 16, 2009, 5:16 pmDr. T:
As a Bank of America customer and former Banc of America Investment Services (BAIS) customer (over one million invested), I had kept up with what was happening to these institutions. In 2008 Mr. Lewis decided to play the rent-seeking game and sucked up to Bernanke and Paulson. He did so against the recommendations of other Bank of America executives. Lewis was treated favorably by the Bush administration (which pushed the Merrill Lynch takeover on him). But, he screwed that up. Instead of buying Merrill Lynch and transfering its customers to BAIS, he decided to keep it going as a semi-independent division and transferred to it hundreds of BAIS employees (against their will, for the most part). This lengthened the transition period, confused investors (many of whom wanted out of Merrill Lynch), and screwed BAIS customers because too many agents had transferred. On top of this, Obama's team treated Ken Lewis, Bank of America, and BAIS like shit. The Bank's stock lost 90% of its previous value. Ken Lewis was kicked out by the Board of Trustees. Now he gets further shat upon by the feds. Good. If you crawl into bed with vipers, you should expect snake bites. A lot of his customers got hurt far worse than he.
As to the legality of the salary retraction: the federal government doesn't care. Obama's crew has violated so many Constitutional principles that no one can keep track. The few that challenges got to court were won by the feds. Our federal judiciary doesn't care about the Constitution, either.
October 16, 2009, 5:40 pmnom de guerre:
so, dr. T, if i read you right....lewis not only ignored/violated his fiduciary responsibilities to his company and employees and shareholders by agreeing to but the merrill lynch vessel "titanic" - which **he knew good and damn well was sinking like a rock** - he THEN, unbelievably, made things WORSE by trying to be cunning and re-arranging the deck chairs and cracking open the purser's safe while the vessel continued to sink. proving himself to be both gutless AND dishonorable, as well as a *grotesquely* inept manager. it would seem paulsen/bernanke made the right call going to muscle HIM, rather than buffet or blankfein. jamie dimon agreed to take bear stearns, it's true, but he paid about a penny on the dollar and - IIRC - he made treasury guarantee the deal so he couldn't lose. MAYbe that's why HE'LL be getting a salary and bonus this year, as opposed to good ol' ken.
hell, knowing that, i hope he writes a book too. what could he possibly title it? "not my fault, i was on crack!"? "how disloyal phone-center contract employees in bangalore brought down a mighty bank!"? "see? THIS is why we need higher bounced check & ATM fees!"? the mind simply *boggles*.
October 16, 2009, 6:26 pmJohn Moore:
And a whole lot of Americans are not going to feel sorry for him about this. The government is very wrong.
However, the financial sector, and large corporation executives, have been stealing from the rest of us for years, as is evidenced by enormous salaries, bonuses and retirements which cannot be justified by the interests of the stockholders.
The result of that tied to last years collapse is a strong populist movement to throw out these undeserving thieves.
I think the fundamental ideas behind that movement are correct... but the consequences could be pretty nasty.
October 16, 2009, 10:04 pmMichael Miller:
Lewis agreed to it though... but I have no doubt he was coerced. They threatened him with an indictment. Thats how the system works. If he fought them, he would lose everything. Like Skilling.
October 17, 2009, 1:00 amDoug:
Pop quiz: Which character from Atlas Shrugged does Ken Lewis most resemble?
I think he had an opportunity at one point to be Hank Reardon, but by choosing to cooperate with the government, he ended up more like James Taggart.
October 17, 2009, 4:55 amstan:
Ken Lay getting the shaft from Obama is just one in a series of scary developments. The bondholders' shafting in the auto debacle is another example of BO-zo using his power to abuse people. This newest one is even scarier.
http://www.nytimes.com/2009/10/18/us/politics/18address.html?_r=1&hp
" President Obama mounted a frontal assault on the insurance industry on Saturday, accusing it of airing “deceptive and dishonest ads†to derail his health care legislation and threatening to strip the industry of its longstanding exemption from federal anti-trust laws.
In unusually harsh terms, Mr. Obama cast insurance companies as obstacles to change interested only in preserving their own “profits and bonuses†and willing to “bend the truth or break it†to stop his drive to remake the nation’s health care system.
Chicago-style politics.
October 17, 2009, 9:06 amtomw:
First they came for the Auto Execs
Then they came for the bankers
Then the insurance brokers
...
tom
October 18, 2009, 5:45 amarizona dentist:
All these czars that are being put into place is really, really scary considering the blanket power they seem to have. Scary.
October 18, 2009, 9:36 pmMethinks:
Nom de Guerre,
If Lewis said "no", then Paulson would have brought down the full force of his regulators on him. How would that protect his shareholders? It wouldn't. It would do the opposite. So, you're wrong if you think he was merely protecting his "cushy" job and big bonus. Standing up to the power would have cost the shareholders dearly and Lewis knew that.
If that didn't work, Paulson would have ousted Lewis and we'd be talking about some other poor schmuck. We're talking about a little something bigger and more mean than not taking lunch.
Talking big about standing up to the vast power of the United States Government is very easy when you're sitting in the peanut gallery. If the regulators show up on your doorstep, I would love to see how fast you shit your pants, buddy. You'd shit and piss and prostrate yourself within seconds.
Why didn't they go to Buffet or Blankfein? Blankfein runs Government Sachs. It's all very buddy buddy over there - you know, friends and all. The cult of Goldman is a shiny, creepy thing. They couldn't bring the banking regulators down on Buffet, so there was no leverage there and there weren't any other banks in good enough shape to buy Merrill.
You're right, of course. Either way he pays. It's like dealing with violent thieves. If you don't fight, they rob you and you hope they'll leave without killing you, but they'll probably just kill you anyway.
And the government wins because people like you don't see how these guys were tortured into going along with the government plan and you'll blame everyone but the thug. This time it's Ken Lewis. Next time it may be you - but don't worry, the public will blame you for protecting your "cushy" job, not the hammering, stammering thug holding the gun to your head.
October 19, 2009, 6:46 pmnom de guerre:
methinks -
had lewis said "no", and the paulson/bernanke crime family "brought down the full force of their regulators down upon him", several things would have happened, all of them ultimately beneficial to lewis and his company. (and the whole country, BTW)
1) lewis would have been able to say, in court, under oath, that he and his bank were threatened by P/B
2) that whole "bringing full force of regulators down" thing would have left a paper trail, which would have been released under legal rules of disclosure, thus bolstering lewis' story
3) what jury would convict lewis having seen the P/B "threat" paper trail? especially after the scope of the bailout scam became known and notorious?
4) P/B would have had to testify in open court what they were doing/thinking, thus
5) allowing any competent lawyer to shred them in re that whole "must write bailout check or whole system collapses!" con game they played on congress
6) lewis and b of a are acquitted, damages are ordered paid, and P/B are indicted for conspiracy and fraud, thus
7) almost certainly derailing the *obama* bailout scam, since by then, bailouts will have (finally) been exposed as the massive ripoffs they are, thus
8) saving american taxpayers at least $1,000,000,000,000. (and probably much more, since the idiot dems are pushing for yet **another** bailout.)
of course, doing so would have required lewis to possess a set, as well as the brains to see & think strategically. (you know, like CEO's are always bragging they're so good at.) and therein lies the problem.
hell, since paulson and bernanke were in such a panic at the time, lewis actually didn't even need the nuts or the vision to understand all those things above. *the whole world* knew P/B were in a hurried panic. lewis was probably just the first guy they called & threatened. if he'd said 'no', P/B didn't think they had TIME to unleash hell on him. they had a scam to sell, and not much time to sell it: they couldn't waste time with legal maneuvers! they'd have just hung up the phone and called the next guy on the list. lucky for them, 'guts' lewis fell for the pitch.
what were your other slobbering fulminations disguised as arguments? oh, yes: "and the government wins because people like you don't see...." "you'd shit your pants, buddy!" "the G is all buddy-buddy with goldman." uh-huh. and ken lewis, as opposed to buffet or blankfein, was just a poor working-stiff schmuck. it's not like he was CEO of one of the world's largest banks, like *those* guys were. if only he WAS, he coulda stood up to them!! he coulda hired good lawyers! he coulda called press conferences! given an exclusive to the WSJ! turned a spotlight on the scam, which was the LAST thing P/B wanted! he coulda made his bought-and-paid-for congressmen & senators put a stop to it! if only......
no...hold on a moment!! he....he WAS the CEO of one of the world's largest banks, wasn't he? just like blankfein. just like dimon. and he STILL caved like a little bitch. MUCH easier to just protect his job and lie to his shareholders. hmm...wonder what those other CEO guys have that lewis didn't? (hint: this year, one of them is "a salary and bonus".)
as for me, i see just fine, thanks. how about you? have you always been such a self-important pompous ass, who also wants to be a self-proclaimed-bad-street-dude, methinks? or are you just secretly lewis himself, trying to spin his notorious cowardice and grotesque managerial ineptitude into something that somehow doesn't stink like babyshit?
October 20, 2009, 12:33 amMethinks:
Keep rocking that dream, Nom!
The regulators would have found VIOLATIONS!! Gasp!! Indictments. That's what your paper trail will lead to.
The regulatory maze is so hideous that not ONE single company goes through a single DAY without violating SOMETHING. Mind you, they got poor ole' Mike Milken on securities parking - an activity EVERY bank participates in. He was exonerated later. Did you hear about that? Unlikely. He's still banned from the industry and Drexel is still dead. Still think it'll be beneficial to investors and the industry?
Instead of spending all your time concocting counter-factual fantasies, you would do better actually availing yourself of the facts. No other bank COULD have bought Merrill. You obviously know f*ck all about the industry and how regulators are used to bring whole companies to heel.
Thanks to idiots like you, the power of government grows unabated.
October 20, 2009, 7:04 amnom de guerre:
well, methinks, i guess we'll just have to agree to disagree. you can go back to flexing your muscles in front of the mirror, while working on your dark scowl, now. meanwhile, thanks to idiots like YOU, the titans of the financial industry continue to reflate the bullshit bubble and push this week's scam onto the public (are ARC's back in vogue yet?) until the next crash, while ken lewis makes plans to "spend more time with his family". pump 'n' dump 2, baby.
October 20, 2009, 10:29 amJP:
How much income tax do you have to pay on $-1000000.00?
October 26, 2009, 1:50 pm