NEW YORK (Reuters) - Federal Reserve Chairman Ben Bernanke on Thursday pushed back hard against accusations the Fed threatened Bank of America executives if they halted a merger with Merrill Lynch or pressured them to withhold bad news about the troubled investment bank.
KEY POINTS: * “Neither I nor any member of the Federal Reserve ever directed, instructed, or advised Bank of America to withhold from public disclosure any information relating to Merrill Lynch,” Bernanke told the House of Representatives Oversight and Government Reform Committee. * The top Republican on the panel, Representative Darrell Issa, on Wednesday charged the Fed had covered up its involvement in the merger and “deliberately hid” important details from other federal regulators.
CUMMINS CATHERWOOD, MANAGING DIRECTOR, BOENNING AND SCATTERGOOD, WEST CONSHOHOCKEN, PENNSYLVANIA:
“He’s put a lot of miles on the vehicle in these last few months. I don’t know what to say except that it is part of the job. He is absolutely a lightning rod for all of this stuff. But that’s what he signed up for. Personally, I think he’s done an OK job. That whole Bank of America thing smells a little funny, but we weren’t in the back room over the weekend when all that went down. We were in extremely tenuous times at that point — there was no confidence in the market. Those were weird times and everybody was nervous because we never did this stuff before and the implications could have been horrendous.”
DAVID DIETZE, CHIEF INVESTMENT STRATEGIST, POINT VIEW FINANCIAL SERVICES, SUMMIT, NEW JERSEY:
“He appears to be handling the questions pretty well. I am certainly rooting for him because I think his track record overall has been excellent. They were in the economic equivalent of a war and there was a lot of pressure to not have this deal unravel, not let the markets take it on the chin with a broken deal and key ‘too big to fail’ companies being in tatters. It was a heated time. He is parsing his words very very carefully.”
MIKE O’ROURKE, CHIEF MARKET STRATEGIST, BTIG, NEW YORK:
“Everyone sees the reality through their own prism, and Chairman Bernanke is sticking to the point that... by breaking the deal they were posing a risk to the system and he was, and we all know it. I think everyone knows the reality of the situation and it’s not as clean-cut as you’d like it to be.
“I think there’s a distinct concern ever since the election — everyone widely believes his job was promised to Larry Summers — but this is the type of environment that if you believe you have a good Fed chairman at the helm that he should be reappointed. Not getting vote of confidence from the president yet, there’s always been always a doubt in the market’s mind that he could keep that option open for Summers should recovery not take hold.
“I think more people will come to Bernanke’s defense because he has done the right things. Earlier on, the president probably had to the end of the summer to make a final decision and I think you’re going to see more people come to Bernanke’s defense.
“Right now, it hurts him, but in the end it’s going to work to his strengths because we’ll start thinking about a world and economy without Ben Bernanke and I think most investors and the informed public won’t like change in this type of environment, and if the signal comes down that he won’t get reappointed, definitely it would be pretty ugly for this market and the economy ultimately.”
“So far it’s a little bit discouraging. Congressmen are trying to take pot shots at Bernanke. But I think he’s holding his own. My subjective probability on the chances of his reappointment has fallen but I still think it’s above 50 percent, while it may be expedient now for Washington to blame not reappointing him would send a bad signal. It would shake some confidence in the markets, especially with foreign investors. Anyone they put in there would be seen as a White House plant.”
CHRIS RUPKEY, CHIEF FINANCIAL ECONOMIST, BANK OF TOKYO/MITSUBISHI UFJ, NEW YORK:
“People are transfixed here watching it. The market is quiet today anyway. At the moment it looks like it’s something of a history of what transpired back in October, November and December. Bernanke does seem to be under some pressure by members of the committee. People are a little surprised at the aggressiveness of this. In the market we’d like to think this is a sideshow. It seems to be the Republicans doing most of the aggressive questioning.
“There’s no broad implication here for the markets about the credit easing. Chairman Bernanke is the architect of the Fed’s credit easing process. I don’t we’re going to see the dismantling of these programs.
“Maybe this is just the first shot across the bow of the hearings we’re likely to see in coming years over the greatest financial crisis we’ve seen since the Great Depression. I’m sure there’s going to be a lot more finger-pointing in the next few years as people talk about which financial entity went bust first. It does have a kind of a Watergate feel to it. It’s kind of overblown. I don’t know where this is going. Are they trying to protect the shareholders of Bank of America? It seems to be a tempest in a teapot. It’s a sidebar issue that seems very small given the gravity of events that were taking place at the time. It was a very difficult period. I don’t know what the ultimate goal of this. I don’t know what they’re trying to achieve. You need the main actor here, the architect of the TARP, former Treasury Secretary Henry Paulson.”
PETER KENNY, MANAGING DIRECTOR, KNIGHT EQUITY MARKETS, JERSEY CITY, NEW JERSEY:
“I think that most of the Street is looking at the testimony and shaking their heads. I think it is a witch hunt, and that most people think it’s a waste of time to even hold the hearings. Bernanke has done a job that few men could even have accomplished. There’s no argument about that.
“I don’t think he’s influencing the markets. That’s a good thing. Any influence he could have would be negative. The only risk to anything he would say that would surprise the market would be a negative. So far, he hasn’t said anything surprising.
“The movement in the market today is being driven by trade in miners and the commodities space. The group has been oversold recently and now there are people on the buy side.”
JOE SALUZZI, CO-MANAGER OF TRADING, THEMIS TRADING, CHATHAM, NEW JERSEY:
“The market is holding and watching this very carefully. But you have to be careful, I don’t think he’s going to say anything to incriminate himself or anything like that, I’m personally looking at tone. Bottomline is, what they did back then, did it save the system — yes. Did it help — yes. But the question is, ‘did you overstep your bounds?’ And the question to me is, ‘what happens the next time?’ Do you overstep again? Do you change the rules of the game during the game as it goes as it goes. This has been happening a lot lately where they change the rules midstream. So that will undermine investor confidence, that’s my problem. You have to be careful.”