under the proposal shareholders who otherwise have the right to nominate directors and a shareholder meeting would subject to certain conditions be able to have a limited number of nominees included in the company proxy to. to further facilitate involvement in the direct nomination project, to require companies to include proposals related to the nomination process in their proxy materials divided that certain other requirements of the rule are met. if adopted we believe these new rules would afford shareholders a stronger voice in determining who will receive management of the company they own. thank you again for biting me to be here before you today. on behalf of the agency we look forward to working with congress and with this committee going forward on these issues but i would be happy to answer any questions you have. to think of it before i get to question i do want to comment on what we have heard earlier from my republican colleague. i think what we have heard today is the final rejuvenation of the bush administration by many of my republican colleagues because we have heard

the american tax payers are tired of being shareholders. let's get them out and get an exit strategy and more important let's not let the federal government encroach on the business any more than. >> the gentleman from california >> thank you. i would like to begin by thanking you for facilitating this hearing this morning. executive compensation has been complicated and reoccurring issue in our discussions on financial reform. as you mentioned, compensation that promotes excessive risk is a systemic concern. to that end, what occurs in financial centers such as manhattan and charlotte affect 71 across the country including residents from my district california. some of the compensation packages that were lavished on top executives are mind boggling. former executives such as merrill lynch john fame or countrywide's angela lizilo were collecting into the millions while running their companies into the ground. to the extent these ceos and others were incentivized to produce short-term profits they were equally as innocent lives to flood the

shareholders can invest in private equity. that is fine. these guys did not do that good job so let them go. let them go abroad. >> to european firms compensate the way we do? in line with that, is there another way to conceive of executive compensation, or is the way we have been doing it the only way to see it? i could well be wrong, european firms don't pay their executives this way. >> unfortunately, one area where the united states is way ahead of everybody else is disclosure. we don't have comparable data. karloff of disclosure books we don't know about. >> we have increased disclosure, 27 countries, one of the things we find is the rest of the world is slowly catching up to the u. s. stock options, all but a couple countries -- >> i would like you to send me that study. >> thank you, mr. bebchuk. >> the arguments that people will go and work elsewhere is unwarranted because everybody here is focusing on changing the structure. to provide compensation -- it is more the argument would be give them the same amounts. >> you offer a book

it was in the best interest of shareholders of bank of america to proceed. and then sometime after you made this decision, he became aware of the $12 billion hole in the balance sheets. and this was on december 14 of 2008. >> that is when we saw the accelerating loss. >> excel rating as in $12 billion additional. the shareholders already voted to approve this based on the information that was provided. but the $12 billion figure that you became aware of, was of such magnitude that it made you believe that in your capacity as the ceo, you would have to consider invoking the mac clause. . clause would be considered in effect a nuclear option? >> i don't -- >> here's what i mean, if you invoked the mac clause to get out of a deal that you entered into, then there's obviously reputationable consequences in litigation, correct. >> yes, sir, there is that possibility. >> if you lose in litigation, there are financial consequences to your shareholders, correct. >> yes, sir. >> so you wouldn't even consider invoking the mac clause unless there was something of enorm

. >> you didn't disclose that to your shareholders though? >> but the acceleration really took place about a week after -- that's when you saw massive acceleration, not necessarily those days but as a result of the forecast increasing and. so there was -- there was not some wild bluff. we thought we had the real possibility of a mac. >> okay. >> mr. chairman, i yield back. >> the chair recognizes mr. mchenry. >> thank you, mr. chairman. were there specific details that the federal reserve and treasury told you not to disclose to your shareholders? >> no, sir, neither secretary paulson nor the chairman of the federal reserve, mr. bernanke, ever told me not to disclose something that we thought should be publicly disclosed. >> okay. mr. kucinich referenced e-mails and i wanted to get on the record, have you seen -- have you seen the e-mails before today? >> no. >> and i want to make sure we got inthat on the record, mr. chairman, with all due respect to you. as i asked earlier, you've been involved in a number of merger and acquisitions, your i

losses at merrill lynch before the shareholder votes on december 5th? >> congressman, if we take disclosure very, very seriously. if any -- >> were there supplements? >> if anybody in our legal group had suggested we do anything of that nature, we would have done it. >> there were no supplements, isn't that right? >> no suggestions to have a supplement. >> there were no supplements. okay. mr. lewis, look at the following e-mail that circulated on december 23rd, 2008. ", i think he's worried about stockholder suits. knows they did not do a good job of due diligence and issues facing the company are finally hitting home and worried about his own job after cutting loose lots of good people, unquote. mr. lewis, was your decision to tell the government you were considering invoking a mac, which of course refers to a clause in the merger agreements that allows the to abandon the deal if a material adverse change is said to have occurred. in fact a strategy you deployed to protect yourself from shareholder lawsuits? >>, no, it was not. >> isn't it true, mr. le

we are talking about shareholder democracy.democracy starts by legislating by elected represented people not just by granting power to an unelected board. there are those that say corporate boards will exercise the authority and if they don't, well, there could be shareholder elections. the process of picking shareholder boards would make hugo chavez ploch. after all corporate funds to be used in on limited quantities to back up one side and fight the other. s to the pernicious incentives i.t. we are against them and would be difficult to design a system where an executive compensation reflects whether that executive actually helped the company in the long term rather than simply made it look good in the short term. this would be easier for those who have company wide decision making since we could give them restricted stock in the entire company those who led it to the success or failure of a single unit it would be far more difficult and i yield back. >> the gentleman from illinois for two minutes. >> thank you, mr. chairman.

that's up to them and their shareholders. but it should not be done in a way that incentivizes too much risk. and i think it is irrefutable that that has happened in the past. i do differ with the administration in that hopes springs eternal and that seems that if we strengthen the compensation committees we will do better. i agree with what they are trying to achieve there. i agree with that statement a goal. i have less confidence in me that they will be able to find compensation committees among these boards that have the independence. i would go somewhat further. we do agree on the goals and we do agree with the administration on say on pay, and i would say to say this, this is the first of the senate hearings that will leave this committee i hope to bring begin marking up in a month a set of financial regulations that i hope we will have before the house before we adjourned for the summer that will put in place rules about the ride from the message we have learned from the most recent crisis. as i said, we are here not b

in fact a strategy you deployed to protect yourself from shareholder lawsuits? >>, no, it was not. >> isn't it true, mr. lewis, that during the course of your conversations with chairman bernanke and secretary paulson, you requested a letter from the government saying that the government ordered you to close the deal to acquire merrill? >> no, that was not what i asked for. our board was concerned -- >> your answer is no? are you sure has your answer? >> our board was concerned we had verbal assurances but nothing in writing about getting some assistance. i called chairman bernanke and asked him -- >> you're referring to a different letter. i'm talking about a letter -- you requested a letter from the government saying that the government ordered you to close the deal to acquire merrill. wasn't there such a letter? >> i don't recall such a letter. >> your under only but your answer is you do not recall. >> i do not recall. >> isn't it true your request of the letter was motivated by your desire to protect yourself from the shareholders. >> if i can't recall -- >

when was the decision made and how was it made to disclose or not to disclose to the shareholders of your company? >> we disclosed the losses at merrill lynch consistent with disclosing the agreement we had with the government and consistent with us announcing our earnings on june -- january 16th. >> january? why such a long delay? >> again, i'm not a securities lawyer. that is when -- that is when we announced according to the schedules given to us by our lawyers. >> were you ever encouraged or pressured by anyone at the u.s. treasury or by the federal reserve not to disclose until january? >> no. we were working on a goal of getting everything done at once. >> i'm sorry, i cannot hear. >> we were working on a goal of getting everything done at once so we didn't have an announcement of something that would cause more damage to the economy. but nobody ever told us that we should not disclose a disclosable event. >> so, for example, nobody at the federal reserve and no one at the united states treasury urged you to manage the timing of the disclosure so that merrill's earnings and the

>> well, the shareholders, it is reflected in decrease of the shareholding in that price. >> i understand in theory but most stockholders that i know and they are small investors, they think that these humongous bonuses are just a necessary evil and nothing they can do about them and just as bad one place as it is another one everybody is misbehaving they're not going to find anything better on bottom line if everyone is being to the same extent and nobody done anything about it. quite frankly i doubt you'll be able to regulate people into doing the right thing like that. i think that just holding them more accountable individually and personally accountable would make more sense. mr. sperling, i like you're $0.2 worth. >> i actually think the proposals we are talking about would be effective. i agreed with mr. alvarez that there is a bit of and you see this in the hallway that compensation consultants work, it is a plain -- there is less of a this fundamentally sound that, fundamentally good for the shareholder and more how does it compare to the practices of your peers. and so you do ge

it's geared with shareholder interest. what we are concerned with here, particularly in the financial sector, is the health of our economy. at the heart of the health of our economy. the heart of it is basically our financial service industry. and so what we have here in dealing with this issue of compensation and the role it plays in systemic risk is that there is some valve clogging going on. and we need to examine this so that his heart, the heart of our system, the financial system, does not endanger itself with a heart attack. clog arteries bring that. and we do have a clogged artery here. it's clear that excessive compensation has played some degree, some contributing factor to our financial situation. and i think what we are trying to do here, is on two levels. one, we have to respond to companies like aig and others that come and ask for the taxpayers money to help them. we've got to make sure we are good stewards of the taxpayer dollar, to make sure that the compensation is in line. and it's clear, anybody with an

, the bottom of the totem pole, the shareholders should expect to not receive any recovery. there are few exceptions to prove the rule but that is a fair description. >> that is what happened with shareholders and general motors. they have a stock certificate that is a worthless piece of paper. >> the company's plan does not provide any recovery for shareholders. general motors is an ongoing case so i can't predict with certainty the outcome. but the plan that has been filed is not contemplated recovery for shareholders. >> dealers have been notified that they won't be dealers for general motors anymore. same deal, they are out of luck. >> the dealers would be expected to have an unsecured claim against what is called the old state. they will recover what other unsecured creditors -- dealers, shareholders, they come out of this basically with nothing. if the plan is adopted. >> they come out of it as they would in a traditional bankruptcy. either unsecured creditors or in the case of shareholders, even below that. >> every once in awhile and employee would come to my office

are taxpayer dollars and while the president didn't want to be a shareholder, once we have become a shareholder, we certainly want to achieve fair value for those shares so the taxpayers can get back this investment. >> thank you. quickly, dr. montgomery. >> we're using the current resources provided under the recovery act which provide an unprecedented level of dollars that we can use to either support -- as mr. bloom has pointed out, to support the industry. to make sure the companies are viable, step one. to talk about how we support the suppliers and the treasury through its supplier support program, the small business administration through its 7-a loan program and through its dealer program, all have made efforts to support suppliers and keep that part of the sector viable. as far as the workers are concerned. there are over $1 billion in additional funding, multibillions of dollars for retraining assistance. and we've extended and expanded unemployment insurance. as we think about going into the longer term and the new growth potential there are in the recovery act in the department of e

we are going to be a very large shareholder in a company and so as you know for a large shareholder to be selling shares can be disruptive to the other shareholders so we want to be mindful of that. at this point the president's direction is to get out and his order is as soon as practicable. but beyond that we do not have at this point a defined time frame. >> will you put together a plan though? that you can operate a blueprint, some architecture. you got in, the question is how long will the government be involved in running a huge manufacturing or owning a huge manufacturing plant? >> i think that is a fair question. >> i want to appreciate your point. we are owning and managing it and that is important and the president has been clear on that, but your question -- can i put you are involved as a stockholder. >> there will be a very limited involvement as a shareholder, the president has issued a series of guidelines and how he intends us to act as a shareholder. we do not intend to involve ourselves in day-to-day management and those sorts of decisions. the shares will only be vot

for a large shareholder to be selling shares can be destructive to the other shareholders.we want to be mindful of that. at this point the president's direction is to get out, his phrase, as soon as practicable. beyond that, we do not have a defined time frame. >> will you put together a plan that you can operate, some architecture? you got in, how long will the government be involved in running a huge manufacturing facility? >> that is a fair question. i want to appreciate your point. we are not managing it. that is important. the president has been clear on that. to your question -- >> you are involved as a stockholder. >> there will be limited involvement. the president has issued a series of guidelines of how he intends us to act as a shareholder. we do not intend to involve ourselves in day-to-day management. shares will only be voted on core governance issues, the election of directors or a change of control transaction. there will be some involvement but it will not be onerous or overbearing involvement. there will be a strategy to get out, it will be to access the p

i think we believe that if we have, we advertise to shareholders in the public that compensation committees are independent and yet we know that if the company itself hires the compensation consultants, if that compensation consultant can also be taking other fees and being paid by the company, then you have a bit of false advertising so we think what we are doing here, far from being introversive, is simply ensuring that the independence of compensation committees as advertised its independence in fact. >> i guess i am-- bouquet. >> the gentleman from california. >> thank you very much. i would like to thank our panel for being here today to help us wrestle with one of the most serious problems in the financial services community dealing with compensation and bonuses, etc.. there are some things that we have learned about actions that were taken that are very disturbing and i don't know that we have gotten any information to help us understand what went on in some of these actions. for example, i want to know what you have discovered, starting with mr. sperling, about the authorization for

sense of who the shareholders are in corporations in america today that had been well analyzed? >> i will let my colleague from the fcc answer that. the only thing i would just say that goes to your point which is we do have to be very careful in the one size fits all metrics for rewarding behavior and i think some of the experts you are going to hear in the next panel are very persuasive in making that case, that simply using stock, while often successful, is not foolproof and i think it is something we should all, us included, should be studied carefully and listening to the type of people you have coming up on the next panel. >> thank you congressman. i appreciate the question. i don't have i-- i don't know i have a full answer for you and i would be happy to work with you to get that but the issue you bring up is if we considered and most of rulemaking matters i have been involved then. you know, interest of shareholders long term, short-term, percentage ownership, small companies versus large companies, many of the issues we think about when adopting rules and certainly som

we need to introduce safe for pay votes to strengthen shareholder power to replace directors, and shareholders should also have the power to amend the corporate charter and to change the companies state of. finally, in the case of executive pay in banks, or more generally any financial firms that pose systemic risk. here the government should have a broader role. . . regulators should monitor and regulate executives' pay in all banks, regardless of whether they get public funding. the regulators should focus on the structure of pay arrangements, not the amount, and they should seek to limit the use of the type of incentives that have contributed to bringing about the current financial crisis. thank you. >> next, the former chief accountant of the securities and exchange commission. >> thank you chairman frank and thank you for the opportunity to be here today and i applaud the leadership you exhibited in the past when the house did pass say on pay and it is unfortunate the your colleagues in the senate did not share the same wisdom and so as they say-- >> there is a lot of that going around. >

>> well, the shareholders -- it's reflected in the decreasing shareholding. >> i & the pherae but most stockholders that i know, and they are small investors, not a big investors, they think these que ljungqvist bonuses are a necessary evil and there is nothing they can do about them and it's just as bad one place as another when everybody is misbehaving they are not went find anything better at the bottom line if everybody is misbehaving to the same extent and nobody's done anything about it and quite frankly i doubt you are going to be able to regulate anybody into doing that. i think just holding them more accountable individually and personally liable and accountable would just make a little bit more sense. mr. sperling, i would like your 2 cents worth. >> i think the proposals we are talking about would be effective. i agree with mr. alvarez is a bit about -- and you see this the way the consultant works -- it is sply -- it's not -- there is less is this fundamentally sound, fundamentally good for the shareholder and for how does it compare to the practices of your peers. and so y

when your shareholders could have voted to disapprove. an e-mail sent to assistant chairman bernanke the deterioration has been under way during the entire quarter. all be it picking up significantly around mid-november. the claim that they were surprised by rapid growth of the losses seems somewhat suspect. bac management, contention that the severity of merrill's losses came to light in recent days is problematic and supplies substantial efficiencies in the due dill generalsy carried out. we're showing in the internal risk management reports that bank of america reviewed during due diligence. then there's an e-mail from the fed general counsel to bernanke on december 23rd, 2008. "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 over problems 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. if you're not forthcoming i'm not going to have any choice but

we have shareholders here who are concerned. you're about to go into a deal with a company that is worse off than is made to believe. and it just seems to me that and a person with your experience, there are a lot of people in this situation and i don't care what paulson may have said, what bernanke may have said. they would have said, the tell with you, i'm going to stand on principle and my principles tell me there's a mac here and a real problem. if i go down, i go down. but i'm going down on principle. i want to give you an opportunity to tell us, because i got to tell you, i mean, i'm kind of concerned because i think there are some serious credibility issues and i think mr. kucinich raised some things that if i were your lawyers, i would be concerned about. so help me. >> your referring to the fact that despite the fact we thought we could have a mac we relied on the -- >> and i'm also going to the point that i believe that when you said you don't just go and tell the feds and paulson that, look, i smell a rat here. somebo

which is either as unsecured creditors or as shareholders, even below that. >> yep.now every once in a while an employee will come to my office and say, you know, i'm an employee of xyz company, they just filed bankruptcy. they owe me two weeks worth of wages. i say well, let's file a claim. i hope you don't need that money to buy groceries because i don't think you're going to see it. and i was always right. describe the rights of the employees like you've described for me the rights of dealers, the rights of shareholders in just a regular bankruptcy. >> the treatment of employees in regular bankruptcy varies all over the lot. largely because the entity trying to reorganize, say, 363 sale going on in the case of general motors. the entity providing, being the sponsor of the new entity is going to make determinations about what the proper treatment is for employees. and in the case of general motor, the decision was by the management that keeping both salaried and hourly workers working and on the payroll was an important part of maintaining the continuity of the bus

shareholder proposal rules to require companies to include proposals related to the nomination process and proxy materials provided the requirements of the rule are met. if adopted we believe these rules would offer shareholders a stronger voice determining who oversees the management in the companies they own. thank you for inviting me to appear before you today to get on behalf the agency we look forward to working with congress and this committee going forward on these issues and i would be happy to answer any questions you have. >> i do want to comment some of what we heard earlier from my republican colleagues. i think what we have heard today is the final repudiation of the bush administration by many of my republican colleagues because we have heard a fairly vigorous and thorough denunciations of various actions of that administration. no more bailouts, no more taking over companies. well, aei g.i. remember into timber 2008 been told by sector paulson and chairman bernanke, two bush appointees they decided with no congressional input or advice to advance 82 bill in dollars to ai

if not it should have to explain why to the shareholders. >> thank. i appreciate all the time you have spent with us today and the ranking member has a question. >> professor verret, the treasury yesterday released a statement on executive compensation that supported the passage of say on pay. will say on page affected in your opinion? >> well, i think one of the problems that have -- i hope i get across is what we've seen in britain is that concentration of the proxy and pfizer reaffirms has caused a sort of one-size-fits-all solution to take hold and i think it's better to have a flexible approach, compensation committees should have the flexibility to design compensation as appropriate for their own businesses. i also worry about the possibility that say on paper at minimize the ability to change compensation as required by major changes in markets and events in midstream between the annual ad buys revokes and say on pay. i also worry about the effect on say on pay and severance packages and ability to negotiate so-called golden handshake to facili

wouldn't you think that would be the logical thing to try to do, given the obligation to the shareholders? >> first, we did review the case law and i think it was quite applicable. i'm not a lawyer but the advice i got was that it bore very directly on the situation we were looking at, specifically that short term losses, no matter how large, are not a basis for a m.a.c. in this particular case, only long-term, significant losses in revenue or revenue production are grounds and of course merrill lynch has proved to be a profitable acquisition for bank of america. the why not negotiate a better price, that wasn't the issue that lewis originally raised, he was talking about just breaking off the merger but i think would have have been very dangerous because the markets would have been faced with the uncertainty of whether or not the deal was going to go through, merrill lynch would probably not be able to survive absent the support of bank of america so there would have been on immediate problem with merrill lynch which would have created broader problems in the financial markets. >> even i

for months before coming to you, and weeks before the shareholders voted to approve the merger. those fourth quarter losses rose over 15 billion out of the pockets of bank of america's shareholders. but i want to ask did the fed know about those accelerating losses before the fed approved the merger at the end of november? >> no, i don't think we did. >> may i introduce into the evidence this e-mail which is from the new york fed to autrey of merrill lynch dated wednesday, september 17. it says hope this gets to you. our management, that is the new york fed, has asked to continue the flash report on a daily basis and i am sure with the sec. so the fed was receiving detailed information by which they could have concluded that the overwhelming losses at merrill lynch were more than problematic and that the fed could have done something if they chose. now, are you familiar with this e-mail? are you saying that there is no -- >> we are certainly involved in a lightweightn the oversight of those -- of merrill lynch since we began to lend to them but we are not the formal supervisory

are you aware of shareholders complaining about that acquisition as a result of that? >> no, sir, not now. >> okay. thank you very much. yield back. >> thank you, very much. i now yield to the gentleman from utah. for five minutes. >> thank you, mr. lewis, i appreciate you being here. looking at some notes here dated december 31st, these are your notes also looking at some notes taken by joe brice, the cfo at bank of america were taken on december 21st of 2008 about the attempt to pull -- use the mac clause and get out of the merrill lynch transaction. in the notes it says fire board of directors if you do it, irresponsible for country. tim g agrees. is tim g. i would assume would be timothy geithner? >> those are joe price's notes? >> yes. >> i would have to assume with you because they are his notes. >> based on your recollection of what was going on and based on the notes we see from the cfo that was there, fire board of directors if you do it, was that your understanding? >> the -- that was is probably a reference to the conversation i mentioned that i had with sec

bank of america shareholders. we did have a series of rather unusual late developing facts or factors to come to light in the process of the negotiations for this agreement. i'm wondering if it would not be true that -- let me lay the predicate for this by saying that apparently the legal division apparently had an opinion that no delaware court had been found i am quoting him now that it found a material adverse affect to have occurred in the context of a merger agreement. well, one would have to know the facts surrounding those circumstances and to suppose that they could not possibly have been at the same level of intensity because we are in the middle of a national economic crisis. that aside i can understand from that that without knowing what the case law was that there was that conclusion. but couldn't a bank of america have negotiated a reduction in price with merrill had invoked the mac calls, what you think that would be the logical thing to try to do? given the obligation to the shareholders? >> first,

when your shareholders could have voted to disapprove. an e-mail sent to assistant chairman bernanke the deterioration has been under way during the entire quarter. all be it picking up significantly around mid-november. the claim that they were surprised by rapid growth of the losses seems somewhat suspect. bac management, contention that the severity of merrill's losses came to light in recent days is problematic and supplies substantial efficiencies in the due dill generalsy carried out. we're showing in -- and there is an e-mail from december 23, 2008 --

other times independent shareholders. board members do have to be independent, under sarbanes oxley, more of a push of having independent boards of directors as well. they are not always major shareholders. host: bob in pennsylvania on the republican line. good morning. caller: i wanted to make a comment to michael and get feedback relative to fannie mae and freddie mac. i have been in the mortgage industry for 20 years. and the last year, both fannie mae and freddie mac implemented a policy whereby they charge excessive fees, very large fees, from one points all the way to three points on the long side. based directly and solely on credit scores. it has created a situation where people will really pay their bills and do the things that they are supposed to on time, will have minor difficulty in their credit -- say they missed a $35 annual premium on the credit card, the credit scored drop 100 points but just on the basis of something as small as that. fannie mae and freddie mac charged them thousands of dollars because c

those were issues for bankamerica and shareholders.its second function has to do with oversight regulation. in that capacity i am sure the sec already knew about losses at merrill lynch. from now or perspective the issue was we needed to work with bankamerica to develop a package that would assure the viability of the company in case of financial instability. the bank of america's regulators besides ourselves with the office of the comptroller of the currency and federal deposit insurance corporation whom we involved throughout the process and which i personally spoke to both john dugan and sheila bair to make sure they were informed about the situation. >> you were forthcoming? >> i was indeed appropriate with the other agencies. >> and another e-mail we have obtained recently the head of the fdic says to you there is strong discomfort with the bank of america bailout package and that the fdic board does not want to do this. mr. bernanke, what were the concerns at the fdic about the bank of america's bailout, and why did you and the t

design for the exclusive benefits of private shareholders and paid for exclusively with private money. for months later on january the 16th, 2009, the world discovered that merrill lynch had experienced a $15,000,000,000.4 quarter loss. most importantly, we discovered that the merger had taken place only after the federal government had committed to give bankamerica $20 billion in taxpayer money. in short, bank of america's acquisition on merrill lynch began in september, 2008 as a private business deal, and was completed in january of 2009 with a 20 billion-dollar tax bailout. what happened in the interim? it has been shrouded in secrecy but the broad outline is this. when bank of america urged its shareholders to approve the acquisition of merrill lynch, on december 5, 2008, there was no public disclosure of any problems with the transaction. i have a bank of america ceo, ken lewis has testified that just nine days after the shareholder vote, he discovered a 12 billion-dollar loss at merrill lynch. mr. lewis said he told then treasury secretary hank paulson that he was strongly cons

lewis called the merger a great opportunity for bankamerica's shareholders. -- bank of america's shareholders. it was negotiated between to willing parties. it was designed for this clause a benefit of private shareholders, and it was to be paid for exclusively with private money. four months later, on january 16, 2009 after the merger was consummated in the quarterly earnings were announced, the world woke up to a different kind of marriage. the american people discovered that merrill lynch had this very -- had experienced a $15 billion fourth quarter loss. most importantly, we found out that the merger had taken place only after the federal government had committed to give bank of america billions in tax payer money. what happened in the interim? when bank of america urged its shareholders to approve the acquisition of merrill lynch, there was no public disclosure of any problems with the transaction. having a deposition taken by the new york attorney general, mr. lewis testified that just nine days after the shareholder vote, he discovered a $12 billion loss at merrill lynch. mr. lewis sai

we are acting as a reluctant shareholders as a result because that is the only way to help gm succeed. what we're not doing, what i have no interest in doing is running gm. gm will be run by a private board of directors and management team with a track record in american manufacturing the reflects a commitment to innovation and quality. there will call the shots about how to turn around the company. the government will refrain from decisions and all but the most fundamental of corporate decisions. when a difficult decision must be made on where to open a new plan or what type of car to make the new gm, not the government, will make that decision. our goal is to get gm back on its feet, take a hands-off the purchase, and get out quickly. exiting requires not only new investment by giving gm a chance to start by clearing away the massive past debts weighing down the company. that is why earlier today gm did what chrysler has successfully done and filed for chapter 11 bankruptcy with the support of its key stakeholders and at the u.s. government. in all likelihood this process will take

circumstances in which the ceo of a system ackley important firm might be expected to have his shareholders take a bullet to protect the overall health of the economy in a crisis situation? >> no. that's not -- that's not appropriate under supervisory practice and we have not done that. >> okay. so do you believe that there is any need for any additional legal clarity about the duties of the ceo to the shareholders to the regulators and to the overall economy in times of systemic crisis? >> there might be something for congress to consider but the rules as they currently stand are clear that you can't force somebody to take actions against the interest of their own company for systemic reasons alone. >> so you did not cents at any time that there were ambiguities that would be better if they had been made explicit in law? >> it was always clear in our thinking and advice to mr. lewis it wasn't just an issue of the financial system but think of america at risk and he should take that into consideration when he made his decision. >> so it was the indirect benefits to the shareholders from not

you will see more shareholder rights and shareholder flexing their muscles.host: next on our independent line. caller: good morning, i would like to ask the reporter with his general political philosophy is. today we cannot count on a lot of our main press to tell us just that -- they generally just have an agenda. number two, what i believe is going on is institutionalized class warfare. if we decide to have the government set the standard of what people can be paid, that is the distribution of wealth. i don't think the capital system is made for that. also, i wanted to say that i believe the problem with the excessive pay going on is a lack of integrity of the people in the high positions, along with the cultural attitude that has been adopted for the past 20 years. all of these problems can be traced, the derivatives, and the excessive compensation, it can be traced back to congress and our tax laws. i would like to hear what the gentleman has to say. thank you. guest: congress has no intention of putting specific pay standards, by saying company x can onl

it will be a shareholder. and its policies on governance as a shareholder will be made public soon. >> mr. allison, you well know this, we all do, government programs are quite often difficult to create and sometimes just about impossible to terminate. the t.a.r.p. has a statutory termination date that can be slightly extended. >> yes, sir. >> at the request of the treasury secretary. you know this. do you believe that the t.a.r.p. program should ultimately be terminated? and would you have any concerns if the program were converted into some kind of permanent revolving fund? >> senator, i think that's an important question, many americans as well as people in congress are asking. as you said, the program is scheduled to terminate at the end of the year, although it could be extended by an act of the secretary until, i believe, as late as october of 2010. but i think it's important to point out that the programs within the financial stability area have themselves termination provisions, many of them. there are

taxpayer is our largest shareholder. >> thankou

. >> and how many shareholders did chrysler have? >> two. >> and how many shareholders did general motors have? >> we had 550 million shares outstanding so thousands and thousands of shareholders. >> they're just out today? >> yes. >> okay. these dealers, what's their dealership worth without the brand and maybe somebody from the dealership can give me that. >> practically zero. >> practically zero. >> senator, the value of their business would be the franchise value and the real estate, essentially, real estate has been seriously devalued because these are single purpose buildings that will not be reoccupied and the value of the franchise are what we call good will or blue sky is virtually gone. >> let me ask chrysler and gm, what's the value of the bonds today? the indebtedness? is it ten cents on the dollar, 15 cents on the dollar, five cents on the dollar? >> in the caves our bonds, they have generally traded less than 20 cents on the dollar. in some case less than 10 cents on the dollar. >> chrysler? >> we have no bond. the equi