this is base odd ken lewis' testimony.lked about this with him and fed chairman bernanke. you called the nine biggest banks to washington. they don't know what the meeting is about. he describes the meeting. they sat on one side. male speaker: bernanke, ms. bair sat on the other side and told them they would take t.a.r.p. money, like it or not. so i have one last. that was on october 13th. i want to go back to october 3rd. when we started down this bailout road, this bailout fever that grabbed washington wibt started on october 3rd where the united states government decided to give you $700 billion of taxpayer money. the premise of that action was you were going to clean things up and things were going to get track. and yet to date, the treasury has not purchased those assets. so i want to know, when did you know that you could not be able to do what you told congress -- i remember hearing -- sitting in on the conference calls. i remember when you came in front of lawmakers and you talked about, we're going to buy these tr

no one feels that way, but ken lewis overreserved. they have a lot of good things going.oldman came up with it. morgan is not doing well. too much real estate. >> are they talking about their stock. they copied you. remember how they stole your name? morgan stanley with the call on the restaurants. >> was that the booya call? i have to say, let's understand this. i love mcdonald's, but it's not the right stock here the same way that colgate is not the right stock and morgan stanley made a real point. china is turning back to the positive and that throws the stock down to the 32-33 level. this is the thing people want. >> a brazilian south african, belgian or jamaican beer. >> there real american beers. we found them. >> we have them in pennsylvania. and i like the beer. >> wow. isn't that an amazing coincidence. have a good one. >> 6:00 and 11:00 eastern and the head of the biggest brewer in the united states of america. will there be american booze left? >> what a day for a beer. president obama getting ready for a drink. four hours until they are open. is he forgetting

number one, they're calling for ken lewis's resignation.they've written timothy geithner to basically get ken lewis removed. they're doing that on the one hand. on the other hand, they're demanding a meeting with ken lewis so they could try to get these bank tellers unionized as part of their union. and you know, here's the interesting thing here, maria. i am a son of a union ironwork. i have nothing against unions. i actually think they do very good things, particularly in trades where youisk life and limb. i juston't e it in bank ing being one of those trades unle yo count paper clipas an occupational hazard. t i did this story speaking with a lot peopleery close to ken lewis and asking about the threat that this poses, and for all the things we're talking about, maria, as you know, he's come under pressure for shareholders. the shareholders have put pressure on him. regulators aren't too happy with him. you know, they fear this union the most because of its plugs within the obama administration, and they fear it because they're basically

former treasury secretary hank paulson getting grilled on the hill about whether he strong armed ken lewis into buying merrill lynch. paulson says, yep, it was me, trying to send a strong message to lewis, but didn't encourage him to withhold information about merrill's problems. they are in recess right now. we're going to head back as soon as they start. and joining us for the rest of the show will be steve liesman, as well. >> that's right. and we are going to talk with steve more about jpmorgan. it did have a blow quarter. tomorrow we will hear from its rivals and bank of america in the spotlight today. and then there is citigroup. we will find out if you should be banking on the banks with your money ahead of those reports. . >>> the market right now, however, has been really keeping its eye on what's been going on on capitol hill, and contrast that with the earnings reports, and it's really been a tug of war on the dow jones industrial average which is up about 9 points right now. resill yept, michelle, really in the face of the fact that we have cit not getting any government assist

ken lewis. >> i was attemptinto send a very strong message ken lewis terms of how strongly the f antreasury viewed this matter. >> reporter: ty viewed it strongly becse they worried a ncelled deal would throw the markets to turmoil. significant losses amerrill lynch were giving lewis send thoughts but ulson says pulling out would have been a bad call. >> it wod have shown a lack of judgemen and i think it would have reallundermined the viability b. of a. and merrill lynch and the financl system. >> reporter: last moh, fed chairman benernanke told the committee the government d nothing inappropriate intimida bank of america executives. toy, paulson went further saying hwas never told by the d to threaten lewis. congssman dan burton wasn't convinced. >> if you came away om those phe calls, somebody must have said, "hey! can't let them do this!" and i would suggt that it might have been mr. rnake. >> whai would say to you. i doot know whether someone in the conversaons or calls expressly said it, or if m understanding came fm just the tone and the fcefulness. >> you know, you're a ry smart man

the only -- this came up in connection with ken lewis asking me for a letter from treasury. and what i said to him about a letter from treasury is i said, ken, we do not have any kind of a specific agreement here. we haven't decided on the size of the program, the dollar amount, we haven't decided on how many assets. and so if i gave a letter, all i would be saying is what i've already said publicly, which is that b of a is systematically important, and that we are committed to -- >> here's what we said -- >> committed to not having a failure. so my -- let me just finish. >> you're using up all my time. >> what i said is the opposite. >> mr. paulson. mr. paulson. please pull the mic closer to you. >> oh, sorry. >> if we give you a letter, we will disclose it is what i said. >> here's what was said in testimony. bernanke and paulson insisted that lewis rely solely on their verbal assurance of more support, because as paulson told lewis in a written pledge, quote, to be a disclosable event, and we do not want a disclosable event. >> well -- >> and he goes into more detail than

bernanke responded no, sir, in other words it wouldn't be appropriate for ken lewis and bank of america to feel pressured. given bernanke's acknowledgement in the hearing that threatening to fire bank of america's management would have been inappropriate, are you prepared to take responsibility for issuing an inappropriate statement? >> i certainly take responsibility for what i said. i think it logically followed. i laid out a train of events and i think it logically followed that that's what a regulator should do. i would say i think chairman bernanke when he testified here last month, he acknowledged that if someone put their decision to harm the company, they deserve to be held couldable. that's what i was trying to communicate to ken lewis. >> you stated you took issue with bank of america's reason for invoking the mac. did you read their legal justification? >> nope. >> you stated you relied on the legal basis or rather the fed's legal staff for their view on the mac as your justification. are you aware or do you know the names of the staff you relied on? >> i listened in and part

you know, however, ken lewis indicated they did. then, beinof course, in terms o paulson, we want to talk to him about whether this occurred. these are questions we need to get answers. it seems there was a whole lot of power in the hand of two individuals. of course, if we were going to reform our financial system, we need to look at these things as well. we need to get to the bottom and find out exactly what happened. let's face it, there's a lot of money involved here. we need to know really if ken lewis was incompetent, why wasn't he removed? why would we give him additional money if he was incompetent? these are questions that need to be answered. we're going to look at all this today because as we move forward to look at the system that needs to be reformed, financial system, we might even have to bring back ken lewis again. >> john sununu here. i think secretary paulson has been somewhat clear in previous statements that he felt the merger between bank of america and merrill was important, it would have been good for the fina

and i think that's the problem that ken lewis has.he's lost a lot of respect and credibility with policy makers. >> so fast-forward to today. why is it that the government won't allow b of a to pay the tarp money back? i heard that they want to pay it back. they're being told by regulators we don't want -- we do not accept the money, we don't want you to pay it back right now. why is that? >> you know, my only guess, and i've heard that too, that they want to pay it back, that they don't believe -- and i tell you, you have to put everything you've been reading together to kind of answer this question. put everything together. is they don't believe that b of a is strong enough to pay it back. now, if you take the government at their word, i mean -- >> what happens to the stress test? weren't they supposed to make that assessment with the stress test? >> i agree. but i always thought the stress tests were feather tests. but i think in this context, maria, you have to look at what's going on at both banks. if you read some of the stories

you deseeved the banks inwith both ken lewis and ken bernanke.l the nine biggest banks to watch. they sat on one side, you, mr. bernanke, and you basically tell them they are going to take t.a.r.p. money, like it or not. so i have one question. i think this is critical. that was on october 13. that meeting. i want to go back to october 3rd, because this is when this whole thing started happening. it started october 3rd when the congress of the united states decided to give you $700 billion in taxpayer money and the whole premise was that you were going to take that money and you were going to buy the troubled and toxic assets and you were going to clean things up. and yet to date the treasury has not purchased those assets. i want to know, when did you know that you could not be able to do what you told congress? i remember sitting in on the conference calls. i remember whether you came in front of lawmakers and you said we're going to buy these troubled assets and yet less than 10 days later you injected capital into the institutions. did you de

shareholders voted on and not knowing. >> ken lewis did not tell the shareholders that the losses or deepening into the fourth quarter, eventually $15 billion in the quarter. henry paulson was on the hot seat. this is the most controversial bailout of last fall. what you're seeing is, he give the taxpayer money to ken lewis to buy maryland for without strings attached. bank of america was trying to get out it is a controversial issue going on right now. henry paulson as saying, we did not have the tarp money to bail out merrill lynch they went under. he was the shotgun behind the marriage. martha: hank paulson was picking and choosing who he wanted to save. some deals got 100 cents on the dollar. it is a fascinating tale. everyone should go to the fox business network website and read about it. what is unraveling on capitol hill is interesting. thank you for bringing it to us attention. trace: we are on to the next phase of the confirmation hearings for sonia sotomayor. questions are just wrapping up. more witnesses testify, including the white firefighter in that reverse discriminat

-- did ken lewis ran to back out of the deal in order to squeeze more money out of the garment? d mr. paulson believe that can lewis had demonstrated a colossal lack of judgment? why did he and mr. bernanke leaves louis in charge of bank of america? did officials tell ken lewis to keep quiet about the escalating losses at merrill lynch in the government's commitment to provide billions in funding? the congress make a mistake by giving broad authority to the treasury and fed in 2008 when the tarp fund program was created? should congress have required more accountability and checks and balances in the operation of the tarp fund? perhaps mr. paulson will help us shed some further light on this transaction and help us to answer these questions. i look forward to his testimony this morning. i now yield five minutes to our ranking member of the committee, mr. darrow, for his opening statement. >> thank you. thank you for being a full partner. i would ask unanimous consent that the gentlemen from florida and new jersey bailout to sit in on the panel pursuant to our rules and ask questi

steve: and ken lewis is on the board! clayton: the appearance of improprietary here. one of the important sparts that he then said chairman bernanke did not tell him anything did not tell him, look, you need to tell bank of america that their board will be renounced. we know he's going to go up there and likely to say that my boss had nothing to do with this. gretchen: a crucial point here is that bernanke told the house panel on june 25 that none of this happened. so this is going to be crucial. they're under oath. to complicate matters, here is what the clause is that apparently paulson used when he strongarmed ken lewis, head of bank of america to buy merrill lynch when ken lewis says i don't want to buy them anymore. it's called the mack clause, not a mac computer, the material adverse change which means that ken lewis had the option to get out of this deal. but paulson said, look, you will crumble the economy, it will show a colossal lack of judgment if you go back on this deal. i don't know. if you're ken lewis and you see a $12 billion loss from merrill lynch,

. >> ken lewis's biggest threat. shareholder or an angry union.e have the ceo in a minute.  >>> the stock market average and nasdaq d the s&p are lagging, but the industrial average is up about eight points. >> for more on today's market moves, more on the stock exchange. what are they trading on? i guess that's the way to put it. or not trading on. 886 is the moving average. people keyed in on the level. it will be good for 50 points. here we are right now. if the obama administration keyed in on 8% unemployment and we are approaching that 10%, people are not doing anything until the jobs are lagging. people are still a little fixated on that. >> jittery about the earnings. >> we thought that was going to be a distraction from the key economic data, but such an aggressive -- i don't care what side of the fence you are on politically. you don't care what side of the fence i'm on. no matter what side of the fence you are on, health care changes and cap and trade. noens else can do it best. health care. cap and tack. didn't you say it was about oil

whether he was threatened or not and why hank paulson believed they must go through the deal with ken lewis and hank paulson wanted to back out of the deal. >> was he right. >> he put the wood to lewis. at that moment he was right. >> he did not at the time have any firm agreement with the government. his decision was reached against a backdrop of public commitment undertaken by chairman bernanke and me dating back to at least october 14th, 2008, that the government would act to prevent the failure of any systemically important financial institution. i believe that they have come to the conclusion, prodded by sheila bair cit is not a systemically important financial institution. >> i agree with it but would like to let them down a little easier. we appreciate the point. if you have anything new coming up, give us a yell, our phone wires always open. >>> when we come back, i'll explore the rally some more and get reaction to this cit story, is that 99 the ointment, i want to look at tech stock out look and bank symptom outlook. i want to talk about china that may be the in visible hand in th

>> ken lewis. glenn: ken lewis. did you see him testifying before congress? >> yes. glenn: he was the first saying that i know people who have been threatened by this government. he says they were threatened and then i sits in front of congress and says no, that never happened. >> that was shocking because he was the most adamant one. i thought there was going to be fireworks. i was sitting there -- i didn't have the pudding you gave out friday, but i had popcorn. he shut up. it was like the mafia came to his house the night before. glenn: right. this is like a thugocracy. that is what it is turning into. we will bully you and use anything at our disposal. it is a community organizing trick. it is what acorn did to the banks to have banks give loans to people that couldn't afford them in places they didn't want to give loans. >> there are 30 inspector generals independent of the white house. they want to stay independent. it's nuts. transparency is a joke. all this stuff that we were promiseed is a joke. it has been a joke so far but it is going to be a joke that non

ken lewis that the bank's management could be ousted, if it rejected the merrill purchase. >> jeff: investors viewed today as a colossal buying opportunity, after intel's better-than-expected results last night. the dow opened nearly 100 points higher at the bell. intel shares leapt 8%, giving the dow a 180 point gain by noontime. adding to the bullishness, credit card issuers like american express say they're now seeing fewer defaults and delinquencies. that helped the financials and added more fuel to today's rocket ride higher. the dow rose 256.72 points to close at 8,616.21. the nasdaq added 63 points to 1,862.90. the s&p 500 gained 26.84 points to 932.68. in the bond market, the 10 year note fell 1-4/32 to 96 putting the yield at 3.61%. >> susie: shares of the old general motors lost half their value today as regulators lifted a trading ban on the penny stock. trading was halted friday after some investors confused the new g.m. that emerged from bankruptcy with the old g.m. stock that remains tangled up in court. to be clear: the new g.m. isn't publicly traded now and most of the company

this whole business, did you put a gun to ken lewis' head for the deal?? he said to these guy, straight up, the kind of guy he is, yeah, i put the wood to lewis and paulson was right to do it, he didn't flinch or back off. all these "politico"s are looking for a smoking gun. i don't really understand it. like looking for a needle in a haystack f. these "politico"s found a needle, it would be so rusted and useless at this point in time, they would throw in the towel. here's how goofy they are, half of these guys want to defend ken lou wins and half want to fire ken lewis, they can't make up their minds they're desperately looking for stuff. reality is paulson working with bernanke and sheila bair at the fdic and yes, tim geithner at the new york fed and yes, president george w. bush who supported all this, they did what they could at a time of great peril, when the entire financial system was in danger of utterly unraveling even with the credit freeze we experienced and caused a deep recession. did they do everything right, heck, no. we can debate this forev

paulson also acknowledged he told bank of america ceo ken lewis as his regulator the fed could fire himnk of america backed out of the deal. >> i was attempting to send a very strong message to ken lewis in terms of how strongly the fed and treasury viewed this matter. >> but it wasn't just this deal paulson took heat for. with his former employer goldman sachs reporting billions in profits and having received billions in bailout funds as a counterparty to the insurer aig, lawmakers wanted to know if paulson as treasury secretary favored wall street over main street. >> is some of this money their money? >> mr. cummings -- >> i just want to be able to answer them when i go home tonight. >> two things. first of all, i want you to know that i had no role whatsoever in any of the fed's decisions regarding payments to any of aig's creditors or counterparties. the people that are paying the price had nothing to do with the problem. >> paulson said it was the big banks and regulators who were behind the problem, a problem that needs to be solved through regulatory reform. maria, back to you.

ken lewis acknowledging it's going to be tough through 2010 and conditions are going to be tough. $13.8 billion set aside for bad loans, chargeoffs $8.7 billion, up 25%. nonperforming assets -- the biggest bank. these are huge numbers, but scary and hopefully the bank is big enough to, you know to handle. nonperforming assets up 21%. nonperformers $31 billion.n. another $4.63 billion to reserves. that's up to $36 billion. now, remember, they got $45 billion in t.a.r.p. they're not allowed to pay back because of situation. credit card losses, everybody looks to those. soaring 12%, and the credit card operations lost $1.62 billion. so as stocks moved up in the last week, it's not given back much, but, you know, there are certainly -- if it you want to worry, there's plenty to worry about. but if you want to be an optimist -- >> at least there is revenue. >> hey, joe? >> yeah. >> joe, let me ask you. i'm having an out of body -- >> that's the voice of god, and in my world, you are god. >> i'm having an out of body experience, joe. one of the things that just blew me away, citigroup actuall

today on the hill as lawmakers pressed him again on whether he threatened to remove b of a's ceo ken lewis. >> you were never aware of any backup plan. the only thing -- and you never threatened lewis to remove him or his board? >> you keep putting words in my mouth. i -- i've -- i've now told you three times and told the committee repeatedly that of course i told lewis that we would -- the fed had the authority and could replace lewis and the board. >> well, with citigroup and bank of america set to report tomorrow, how much time left to lewis and the ceo have before lawmakers or shareholders begin calling for their heads? let's get the inside scoop from the man some call the oracle of ricoh park.. it is time to go off the record with one charley gasparino. >> on the record here, i want you to know, i am not from rego park. i was born in the brauonx, new york. i worked in rego park for a news investigative reporting team. that name is courtesy of the brilliant but deranged dealbreaker. >> i'm sure we'll get a call from beth leaven. let's get back on topic, charles. how much more time to p

including ken lieu with is, and, of course, this opens up the question whether ken lewis is, in fact, safe in his job with all these board members resigning for whatever reason they're resigning for. >> we also learned today that the house is passing legislation that pretty much neuters the board to be able to make significant decisions that they should be making and making a better job doing certainly historically. the board role is no longer the board role it was and i'm not surprised to see this. >> any predictions how long ken lewis lasts at this point? >> his demise has been talked for a long time. charlie has talked about it. he's still there. my sense is he'll be here the rest of the year. >> is it a reason to stay away from bank of america stock? >> no, absolutely not. >> with all those board members resigning? >> it's their way to get by the bailout. bank of america. >>> let's move on here. we'll keep you up to date, of course, if any other developments happen. as we close out the best july in more than a decade, we want to show you the best-performing sectors as well as stoc

. >> let me tell a little about what ken lewis says.about difficult challenges lying ahead from continued weakness in the global economy, rising unemployment and deteriorating credit quality that will affect our performance for the rest of the year and into 2010. he says he's convinced bank of america will weather the storm and emerge as an acknowledged leader in the united states financial markets. but when asked about about some of the negatives that came in here, they said the positives were somewhat offset by continuing high credit cost, including addition to reserves. they talked about significant negative credit valuation adjustment on certain liabilities like the merrill lynch structured notes and the fdic charge. >> i just want to jump in here, becky -- >> joe, if we step back for just one second, you know, this is an industry that's moved from the ugly in 2008 to the bad in 2009. hopefully to the good in 2010 and to the excellent in 2011 when they reach closer to their normalized earning power. so i would expect some consolidat

we are going to show you part of last month's hearing with banc of america ceo ken lewis, talking about how the merger with merrill lynch came about. >> let me walk you through the decision to purchase merrill lynch. we made that decision in september 2008. we did so because we saw the potential benefits i just described and without any promise or expectation of government support. in mid december i with the fis that merrill lynch had significantly raise its forecast of its losses and we contacted officials with treasury and federal reserve to inform them we had concerns about closing transaction. at that time we were considering declaring material adverse change which as a matter of contract law can compel consummation of the deal. treasury and federal reserve representative -- such action, significant concerns about systemic consequences and the risk to bank of america in pursuing this course. weeks for government support, limiting the risk of proceeding with the transaction. we both were aware of the global financial system was in fragile condition with the collapse of merrill lynch

ken lewis warns of more weakness ahead.nk about it, b of a is a huge credit business and it's vulnerable to rising jobless rates. citigroup, another troubled financial company, its profits topped $4 billion, also beating the street's forecast. of course, here it was largely the sale of the smith barney division, but these banks, the two of them, have received $90 billion in tarp. so, it's encouraging that their bottom line is on the plus side. surge engine giant google sought profits of $1.5 billion. it had less clicks but people are spending less. we're seeing positive frults the dow. at the moment, blue chips are up 17 points and nasdaq seeing a little bit of pressure going into today's session. it is riding a seven-session win streak. i want to mention one thing that has been buried, nice housing starts, heidi collins. housing starts up for the second month in a row, building permts up. little bit of stabilization in the housing sector and also a good thing. >> yeah, absolutely. we'll be following that one very closely.

and ken lewis. is he worse? i don't know. it's not like they did any nefarious activities, no black holder actives here. in fact, i've long praised them for having a level of transparency that no other financial offered, including, by the way, much business that was actually very solid and worth a great deal of money, a gigantic book of loans that were all current and good. when it comes to disclosure, cit has been a model of good behavior. plus, cit's clients, lots of small and medium-size businesses are some of the main creators of jobs in this country so letting it die could have done real damage to the economy. and in repeating our ability to create new jobs. i've got to tell you, it's a little frightening the government was willing to walk away from the $3.2 million in t.a.r.p. that it invested in cit not that long ago, that's taxpayer money, your money and my money, and we're letting it go down the drain? for what? what bothers me the most is all the fdic had to do was guarantee cit's debt just as its done for so many o

ben bernanke and ken lewis ceoo have testify about the deal. >>> residents looking for work will get a crack at similar stimulus jobs. eleanor holmes norton is hosting a job fair at the washington convention center. 80 employers will be there including private companies, federal and local agencies and nonprofit and training organizations. patsicanip must bring proof of dc residency and asked to bring resumes and wear professional attire and a jobs workshop including a dress for success fashion show. >>> time for the money-saving tip of the day. did you know your computer, scanner, and other peripherals are using energy after you have turned them off. this is called idle current and can really pad your energy bill. way to eliminate it is to use high-tech power strips. one brand is called the smart strip and senses how much power your equipment is using and provides it or cuts it off as needed. it costs $44. tests by an independent consulting company says it saves you enough to save $20 on your electric bill. it is $200 after paying it off. go to the financialista.on wusa9.com. >>> som

bought the toxic assets, threatens ken lewis to be fired if he doesn't do the merrill lynch deal. i don't believe he didn't tell him to say anything about lynch's bottom line. this guy says he never ever used e-mail. anybody buy that? this entire panel, it feels like is it right for the congresswoman to say, is it right you worked for richard nixon in '72? >> she's wrong to talk about nixon. let me ask you this, i still haven't heard -- >> wait, wait -- >> i want somebody to tell me, why would it have been bad for merrill, b of a or citi, wouldn't new institutions have been formed the next day. >> hindsight is 2020. >> which is why congress ought to be looking forward on what to do next instead of looking backward, trying to point blame, tanya. >> dennis, this may surprise you, i will agree with you. one of the things that's truly interesting is how for the past few days we've been talking about this great recovery, looking at goldman's earnings and we want to divorce that from the fact there was this large government intervention a few months ago, right now, you're seeing folks o

ken lewis and federl reserve chairman ben rnanke have testified alread today, it was pauln's turn, andckly defended his actions. >> in the midst of a rapidly changing crisis, our resnses were t perfect, but i am confident th they were substantially correctnd that they saved this naon from great pil. >> report: bank of america got additional $20 billion from the federal governmt to cover merri lynch's losses. >> my view, andhe view of numerous government ficials working on the maer, the nterest of the nation d bank of america were aligned th spect to closing of the merr lynch transactio >> reporter:oday, paulson acknowledged he told lewithe bank's management and boa ould lose their jobs if they voked a clause to exit the deal. >> that uld show a colossal lack of judgment and would jeopardize bank of ameca, merrl lynch and the financial system. it was also apprriate for me to remind him that, underuch circumstance the federal reserve could voke its authoritto remove management on the board of ba of america. >> reporter: feeral reserve chrman ben bernanke has denied threatening to oust le

was on the hot seat in front of the house, and he had no apologies, no excuses for having hammered ken lewis for going ahead with that bank of america/merrill takeover. at the same time, he was just throttled by the house members. and one has to wonder, you know, what lies ahead with the politics of all of this? >> i wrote -- and it's rare for me to do something like this, as you well know. i wrote a scathing indictment of the congress folk who grilled mr. paulson. i was never a fan of his as treasury secretary, to be quite blunt. i thought he was very late for the party, ham-handed, ham-fisted in putting the bailout together. ben bernanke at the fed did a much better job of guiding the process along. by the same token, congress is largely responsible for the failure to supervise the areas of the economy that certain committees, you know, where they had jurisdiction. banking oversight, oversight of various aspect of the economy that they simply dropped the ball, derivatives and other areas. and just to sit there and to beat up on mr. paulson for alleged conflicts of interest or not protectin

here's what citi ceo vikram pandit and bank of america ceo ken lewis said on their conference calls. >> based on everything we see, it seems as though the rate of growth in these consumer losses may be moderating. >> at this point i would say consumer chargeoffs may be close to peaking in dollar terms around year end, although we believe they will stay elevated post the peak. >> now, for bank of america that means it will continue to add to reserves through the end of the year. and while there are signs of improvement, lewis said that profitability is going to be tough in the second half of this year as bankruptcy filings increase and home prices continue to fall. as for repaying the tarp funds lent by the government, lewis says the bank is in talks with the government about this. bank of america is expecting it will be allowed to pay back all of the 45 billion it owes at one time. also on the hook to the government for about 45 billion, citi won't be repaying those tarp funds anytime soon. so it did offer some upbeat comments.. pandit saying the first part of the credit cycle, meani

. >> bank of america ceo ken lewis spoke right before you received your award. he talked a little about his views on the recession and the fact he thinks it may end by the end of the year, although of course unemployment continues to be high through 2010. what is your outlook here, and what does that mean for the market? >> i think ken is right. i think the economy will recover in the second half of '09 into early '10. i think the market typically anticipates what's going to happen to the economy six months or so in advance. so i think it's going to be higher prices from here in anticipation of a recovering economy. and i would say not only with the media names, also in terms of the real estate names and the heavily cyclical types of stocks that will do very, very well as the economy recovers. >> i have to ask you, one of the things i spoke to secretary of education arnie beckett about this earlier today, that i know you're focused on is financial education and the key to economic -- that's a very important part of this path to power conference. what are you doi

ainsley: do you think ken lewis should be at fault as well? >> absolutely.me do it. clayton: i'm going to start using that defense. >> the government made me do it. it won't get you very far. steve: don't tell anybody. and yesterday, of course, they were telling everybody. >> as the congressman said, it wasn't a threat but i felt threatened. steve: the judge will be on two hours and four minutes from now. >> and two of your favorites. geraldo rivera and chris wallace. steve: both on this channel. clayton: developing news. the pope taken to the hospital. the latest on his condition, live from itity at the top of the hour. ainsley: and another breaking story. at least one american injured in the bombing of two luxury hotels in indonesia. and the suspects, believed to be guests in the hotel, might have links to terrorists group. steve: the treasury department is hiring. but you need to know how to draw cartoons. clayton: you're kidding? steve: i'm not. 4l kelly saunder's nature valley, the place that inspires her to go faster... and slower, elk mountains, color

ken lewis made that announcement to investors in charlotte last week.educe its branch network. jpmorgan plans to add 100 or so new branches a year for the foreseeable future. >>> when we come back on this tuesday, pennsylvania governor ed rendell, the 50 state on the front line of the nation's financial crisis. we'll talk about taxes, real estate, the ongoing health care debate. he'll open the door to the keystone state's economy. >>> what do baseball and wall street trading have in common? a lot more than you think. why business on the diamond tells investors an awful lot about consumers and the state of our economy. we'll talk to the president of the yanks when we come back. >>> thursday, a nation diagnosed with a severe economic illness. what's the right treatment? an answer only "squawk" can provide. government leaders, health care industry insiders and doctors and patients on the front lines. a "squawk box" special thursday starting at 6:00 a.m. >>> welcome back to "squawk" here on cnbc, first in business worldwide. one hour away from the opening b

as ken lewis said today we may stay there for a while.didn't get to ask because i had to get ready for this show is will the offbalance sheet factor drag the number up higher. as ba takes back securitization and provide money for them to pay the investors when they mature, will they have to take a larger reserve position? >> what areas would those securitizations be? >> real estate primarily. the legacy from acquisitions. >> right. from which country? >> countrywide primarily.y. >> what about off balance sheet? we got some interesting data this week. it shows certainly stabilization. improvement. hard to say whether it will continue in terms of 30-day delinquen delinquency. >> they are easy to assess. there are analyst that can price them for you if you're a buy side investor. opaque structures are difficult to value. that's the problem we've been dealing with for the last 18 months. the real question comes if we get unemployment over 10% and see loss rates on all kinds of collateral but particularly mortgage collateral go up to levels we

ken lewis, the ceo, said he's a little bit worried about what he's seeing ahead. why is that? they're making money on trading, but the consumers is a problem. they have a rising unemployment rate and they have a big credit card division. people don't pay as much and they don't pay on time and sometimes they don't pay at all. that's a problem. bank of america shares are down 2%. dow is down nine points. remember, going in today, the dow and s&p 500, up four straight sessions. nasdaq's given back some, too. it's down seven. nasdaq going into today up seven sessions. so, quite a win streak. t.j.? >> you mentioned some banks there. another one we can't let you go without talking about citigroup. they also got a whole lot of our money, as you said. >> a very, very good question. citi also reported today. citi also surprised the street, made $4 billion, not so much on revenue. it shed assets, in this case, smith barney wealth division, so that's where it made the money. but impressive for citi, because citi has been one of the most troubled financial companies and, in fact, received

there was something inappropriate about my conversation of december 21st with bank of america ceo ken lewisboard could remove management and the board of bank of america if the bank invoked the mac clause. i believe my remarks to mr. lewis were appropriate. but come on, dylan, you're talking about lots of secrets. last october secretary paulson, some of the ceos from the nation's nine biggest banks, he had a secret meeting with them. he made them an offer they felt they couldn't refuse. they took 250 billion bucks to help prop up their balance sheet and you already mentioned vice president dick cheney. lawmakers say he directed the cia not to inform congress about a secret program to develop these hit squads to kill al qaeda leaders. again, "the washington post" reporting this morning that it was a directive signed by george w. bush. dill snn. >> i want to read the paulson comments. i have representative grayson with us. ellioiot spitzer, gavin, contes all still here. here is the comment that came out. paulson said if a capital infusion is not appealing, you should be aware that your regula

man, ken lewis is still the ceo there. that's amazing, isn't it? all the heat he's taken.r citi, not so. not so. the big bank owned by all of us. at least 34% of it owned did not have the best month. couple of things to point out on citi, by the way, as well. the exchange offer having taken place. there's going to be a rewaiting for various indexes that track citi, or i'm sorry, that track the russell and the s&p and citi is a part of these. is going to have to be reweighted. i believe it's 190 million shares that need to be bought by indexes that track the russell and 623 million shares will be bout, i believe, next week by indexes that track the s&p 500. so perhaps some buying coming in there as a result of reweightings because of that exchange offer that citi finally, more or less, completed. and finally want to enden comments from deutsche bank ceo, joseph ackerman, speaking yesterday, late yesterday, and saying a number of things. you may have seen. deutsche bank reporting or provisioning a lot more than had been anticipated earlier this week. he went on to say yester

and he basically said to ken lewis, and he admitted that he was threatened.yone in the committee room understood that. and he had to not say it specifically, because these folks still exercise a great deal of influence. and this tim geithner was involved in this last one. and it's interesting, and the questions asked mr. paulson, what i believe is intimidation. everyone understands that, and that took place with lewis, but my gigger concern is this pattern of deception. . that is my concern, because when you think about it, the unprecedented level of involvement of the government and the private sector now, this is what is scary. when you have this pressure, intimidation, this pattern of deception is a real concern when we think about what we see. we may potentially see a takeover of health care by the federal government, and that is my big concern. host: we have just a short clip that i want to talk to you about after what about the goals of this situation. let's listen. >> german bernanke, did you instruct hank paulson to tell can louis that him and his boa

do you hope to get more out of him than ken lewis and bernanke going back to he said/he said. >> it'ssaid and, yes, get more people out on the table and get the questions answered, why not. >> congressman, do you have any hope for that? >> i happen to sit on both committees, financial services and oversight. oversight is going back to what joe was talking about, it's going back and asking who was at fault for -- what does it really matter at this point? what i'm worried about and i think scott's worried about and all of us, what is the next four to six months going to be like? if we don't get this thing changed, we're not going to save the economy and we'll be working in strange and inventive ways to try to change things. by wasting any of our talents and time on the fight between whether threats were made or not made, i really don't -- i don't like threats to be made by anyone, but it's not going to change the present reality and the future reality. >> maybe, congressman, people who are calling for an investigation just don't want to see the fed inflated any more. i mean, why not jus

the most high-profile is probably this, i guess, argument you could call it between ken lewis and thek paulson. we will see what paulson says to congress in a few weeks' time. do we know any more about what exactly transpired between the two of them? have you been -- are you satisfd with what the bank has told you? >> i'm looking forward to it, carl. that's something that occurred before my time. and that will work its way through, but going forward, i think it's very important to focus on things that bank of america n do to benefit not only the customer base but their employees and shareholders. >> right. so i'm guessing you don't -- it's not over for you. the's still more information you want, i guess is -- glo i've been to one board meeting, and, again -- >> it's been a month. >> i'm looking forwa to watching the bank of go guard and emerge in a very positive way. >> right. it's a good time to be a bank but there's also a lot of frour pay back the money that's been taken from the government. so how do you -- kind of match those two things up? where is it to be in banking right now?

ken lewis claimed they were surprised by the rapid growth of the losses, it seemed somewhat suspect, unquote. another memo, restricted federal reserve analysis of bank of america and merrill lynch merger dated december 21st, 2008. bac management contention that the severity of merrill's losses only came to light in recent days is problematic and implies substantial deficiencies and the due diligence in the acquisition were clearly shown in merrill lynch's internal risk management reports that bank of america reviewed during their due diligence, unquote. and then there's an email from the fed general council to chairman bernanke on december 23rd, 2008, quote, lewis should have been aware of the problems of merrill lynch earlier, perhaps as early as mid-november. and not caught by surprise. that could cause other problems for him around the disclosures bank of america made for the shareholder vote. now, mr. lewis, i'm going to ask you a series of simple questions and if you're not forthcoming, i'm not going to have any choice but to interrupt you and ask -- i'm asking for your cooperat

. >> ken lewis is worth listening if you're following the industry.e you a pretty close -- it sounds like me a year ago, and many other analysts, meredith and the rest, who were saying, hey, you're coming into a tough period of credit loss and he confirmed that. >> 2010 as well. sorry. >> do you think reserves are getting to the point where they're high enough? >> no. the large banks are never high enough because that's their business model. they always skirted the minimums and when you look things you don't see in their quarterly statements so equally, the question is, do they have the earnings power to redeem themselves over the next year or so? jp is still on the cusp. i think they could be okay. the other three, citi, bank of america and wells are all going to need more money potentially from the government. >> what about the money these guys have raised just in stock they've sold, too? they've gotten a lot of private money. >> that's met the immediate concerns. they look good today. when you add the interest over duration of fall, dramatically lo