Old-School Bartering

NEW YORK, NY -- Financial crisis mayhem once again spurs business reorganization. This time, it appears to be a full-out bid on Bank of America (BoA) by the ex-secretary of the US Treasury, Mr. Hank Paulson. The action followed talks of Bank of America's CEO Kenneth Lewis potentially reneging on prior plans to purchase the failing Merrill Lynch in September 2008.

Merrill Lynch, one of the largest holders of the "toxic" debt produced as a result of the housing and credit crisis, was quite likely to crash if Bank of America had not rescued it. The US Treasury predicted further financial instability if another investment banking giant like Merrill Lynch were to collapse.

But rather than striving for a bailout package for the firm, the then-secretary of the US Treasury appeared to have turned to a more traditional negotiation settlement tactic: bartering. Disagreeing with BoA's CEO and Board of Directors in their consideration of retracting their offer, Mr. Paulson appeared to have exchanged numerous job threats with BoA CEO Kenneth Lewis in return for a controlling stake in the takeover decision.

With the backing of the World Trade Foundation (WTF), Mr. Paulson justified his heroic actions by revealing that they were in the best interests of the US and both banks. This is especially evident from the about $45 billion in bail-out fund injections that Bank of America needed in the subsequent months after the takeover.

Related reading: http://news.bbc.co.uk/2/hi/business/8152858.stm