“I would occasionally go off in partners meetings and say something to the effect, ‘I hope you guys all understand,’ and remind them, ‘people don’t like you. Very few people do’.'”
Hank Paulson
Hank Paulson’s memoir, The Day I Threatened To Break Ken Lewis’s Legs, is out February 1. Presumably there’ll be many pages devoted to the topic closest to the the former Treasury Secretary’s heart– birds– but today we get a sneak peak at the role of another one of HP’s homeboys– God. As most of you probably know, Hank is a Christian Scientist, and it was the big man in the sky, the one with the genius idea not to treat illness with science, who got Paulson through the darkest days of the crisis. Naturally, it was god who came up with the idea to award AIG’s counterparties 100 cents on the dollar, since it would help out his other client, Goldman Sachs. But getting serious for two, it was G-D who, on of of the most harrowing nights of 2008, busted into Paulson’s home, a glorified crack-den, and pried the smack HP was contemplating shooting from his fingers. “No, Hank! You don’t need this!” he bellowed, before forcing his lamb to flush the poison down the toilet.
Mr. Paulson, a Christian Scientist, said his faith helped him through the financial crisis. During the weekend of Lehman’s collapse, he called his wife, Wendy, and told her, “I am really scared.” She said he shouldn’t be afraid, that his “job is to reflect God, Infinite Mind, and you can rely on Him.”
In another scene, an exhausted, stressed-out Mr. Paulson wrestled with taking a sleeping pill, a move that would have violated his religious beliefs. He instead flushed it down the toilet, deciding “to rely on prayer, placing my trust in a higher power.”
Okay, so now that we’ve given appropriate and sincere thanks, can we talk about something that’s been irking HP? Something that stuck in his craw so bad he had to unload in the first few pages of the book? Something that, in the original draft, had an uncensored Paulson throwing stuff out there like “Dumb twat” and “Who is this bimbo?” and “Jesus, Ben, I told you no hookers with the bailout money.”
12:40 Hank, whose rosacea is flaring up like nobody’s business, has arrived to put Geithner out of his misery.
12:41 He’s happy be to be here and answer your questions, but just so you know, he’s got limited knowledge of the topics and not a lot of time, so let’s move this shit along. Seriously, nature walk at 1:45. The birds wait for no one.
12:53 Paulson: “All money printed is green.” Also the lead track on his new album. Not a coincidence.
1:00 Hank is not going to second guess the opinions of people, for instance, Tim Geithner. So piss off.
1:15 I love you Elijiah Cummings but why????????? Why do we have to keep talking about those mo-fucking AIG bonuses??
1:20 Interrupted by the iPad. Oh, Mock-Turtleneck is gonna pay for this.
As previously mentioned, Neel Kashkari has been living in the woods since leaving the Treasury. Up in his secluded mountain cabin in California, Kashkari has been undergoing a four-step program of his own design called “Washington detox.” It involves building a shed, chopping wood, helping Hank Paulson with his book and losing 20 pounds. You might’ve thought that working 24 hours a day would’ve left the little guy gaunt and malnourished but au contraire– Kashkari packed on the lbs like it was his job, mostly by never having time to working out and dining on “family-size Cool Ranch Doritos.” And he’s determined to lose the weight not simply because he wants to fit into his old pants but because of what the fat around his waist represents– the most miserable year of his life. Yes, these are not just your average inches of flab. Each molecule of fat is a Congressman berating him on the hill. It’s him nearly having a heart attack while working on his first TARP report. It’s Paulson looking at him with eyes that say, “Maybe you should skip dessert tonight.” It’s a demon.
It’s personal, this — him vs. Washington. “It’s detox of a tough period,” Kashkari says later, wiping his forehead. “Through exercise like running, but exorcize is relevant, too.”
He’s been working hard, but he’s not there yet, and until he is, dinner is out.
Now, after six months of dieting and 45-mile alpine bike rides, the gym scale under Kashkari’s sneakers reads: 181.2. “No dinner tonight,” he grumbles.
“Are you detox’d yet?” A friend had messaged. Not until he weighs 180.
If it sounds like Kashkari’s being a little extremist with his diet, it’s just because he really, really doesn’t want to be compared to Larry Summers.
In Washington, Kashkari, about 5-foot-10, had ballooned — “I’m a stress eater” — to 203 pounds. His waistband cut into the folds of his stomach. His biceps felt like “bags of Jell-O.”…He’s put on classic stress-related weight under his chin.
But anyone can see Kashkari has made a lot of progress. Even his (prick?) former boss, whose book Kashkari is reliving the horror of last year in order to help edit, is noticing, and offering backhanded compliments.
Raj-Raj and Hank Paulson yuk it up at a business and technology conference, November 2004. [via]
The party line is that Lewis was well on his way to dumping the Merrill merger via a Material Adverse Change clause and dumping (one assumes) the now empty dancecard holding bank into bankruptcy. If you want to add nuance, you can append “unless you give us some cash” to the end of that particular party line. Sure, Lewis is making quite a lot of noise about this being forced into marriage with Merrill thing now that push comes to shove, but did Lewis really have an option? A look at the merger agreement gives us some interesting hints:
…a “Material Adverse Effect” shall not be deemed to include effects to the extent resulting from (A) changes, after the date hereof, in GAAP or regulatory accounting requirements applicable generally to companies in the industries in which such party and its Subsidiaries operate, (B) changes, after the date hereof, in laws, rules, regulations or the interpretation of laws, rules or regulations by Governmental Authorities of general applicability to companies in the industries in which such party and its Subsidiaries operate, (C) actions or omissions taken with the prior written consent of the other party or expressly required by this Agreement, (D) changes in global, national or regional political conditions (including acts of terrorism or war) or general business, economic or market conditions, including changes generally in prevailing interest rates, currency exchange rates, credit markets and price levels or trading volumes in the United States or foreign securities markets, in each case generally affecting the industries in which such party or its Subsidiaries operate and including changes to any previously correctly applied asset marks resulting therefrom… (Emphasis added).
In fact, the entire MAC clause is pretty restrictive. It becomes pretty easy to see that this was a pretty tight document.
This brings up the question: How could Paulson fallen for such a bluff? He is (was), after all, a savvy banker. Did he just not read the document? Did Lewis forget to have a staffer review it for him and give him the cliffnotes over a box of Boone’s Farm Strawberry Hill? Or did someone (or someones) pull a fast one?
Agreement and Plan of Merger [SEC.gov]
Why didn’t Ken Lewis tell Bank of America shareholders that the company they were acquiring was set to report an imperial asston of losses for the fourth quarter, information that would’ve been more useful to them before the deal went through, rather than after? ‘Cause Paulson and Bernanke shoved him in the trunk of a Buick, took him to an undisclosed location and suggested in no uncertain terms he keep his trap shut, that’s why! According to testimony from the Bank of America CEO’s February sit down with Andrew Cuomo, Lewis was “urged to keep quiet while the two sides negotiated government funding to help BofA absorb Merrill and its huge losses,” apparently for the good of the financial system and the country, and since he *is* head of America’s Bank, K the the L felt urged to comply (plus the bit about harm to his body if he failed to do so).
Q: Were you instructed not to tell your shareholders what the transaction was going to be?
A: I was instructed that ‘We do not want a public disclosure.’
Q: Who said that to you?
A: Paulson…
Q: Had it been up to you would you [have] made the disclosure?
A: It wasn’t up to me.
Q: Had it been up to you.
A: It wasn’t.
Oh, and there was also the matter of Paulson threatening to take Lewis out (of office) if he didn’t do exactly as he was told.
- Use the Bloomberg command
NH BLG_DEALBREAKER <GO>
to access Dealbreaker
