Bank of America's acquisition of Merrill Lynch - and the government's role in the deal - are the subject of a hearing Thursday before the House Committee on Oversight and Government Reform. Bank of America executives said they were told their top brass would be fired if they attempted to renegotiate their bid for Merrill by declaring what's known as a "material adverse change" (MAC) - a clause in their acquisition agreement that would allow them to walk away or renegotiate the price in light of Merrill's mounting losses.
"The Treasury and the Fed strongly stated that if we were to invoke the MAC clause and fail to close this transaction, they would remove the board and management due to the risk we would create in the system," according to draft talking points prepared by company attorneys for Mr. Lewis ahead of a Dec. 22, 2008, board meeting.
How does the Fed come to have the authority to fire the board and management of a private company?
If they can do this to BofA, who could resist them? (Calling Lord Acton . . .)
And remember, where you have a concentration of power in a few hands, all too frequently men with the mentality of gangsters get control. History has proven that.
- Lord Acton