WASHINGTON — Former Treasury Secretary Henry Paulson on Thursday strongly defended his decision to pressure Bank of America to go through with a deal to acquire troubled Merrill Lynch & Co. during last fall’s financial crisis, saying the failure of the acquisition would have threatened the stability of both institutions and the overall economy.
Facing hostile questioning from some Democrats and fellow Republicans on the House Oversight and Government Reform Committee, Paulson also justified the broader actions he and other Bush administration officials took during the crisis in conjunction with the Federal Reserve and other financial regulators.
In his first appearance before Congress since leaving office in January, Paulson said the actions “were not perfect” but “they saved this nation from great peril.”
Asked to explain how bad the conditions would have become had the government not stepped in to help financial institutions, including injecting billions of dollars directly into large banks with some of the $700 billion bailout fund, Paulson said he had been told it would have resembled the Great Depression with “people in the streets” and global political instability.
“I knew it was going to be very bad, and I didn’t want to experience very bad,” Paulson said.
Several lawmakers accused Paulson of being evasive on his recollection of what they called threats he and Federal Reserve Chairman Ben Bernanke made to fire Bank of America chief executive Ken Lewis if he pulled out of the Merrill deal in December.
Reps. Stephen Lynch, D-Mass., and Michael Turner, R-Ohio, also accused Paulson of misleading Congress during its consideration of the $700 billion Troubled Asset Relief Program. The program was designed to purchase toxic assets from financial institutions, but Paulson decided shortly after it was passed to use a large portion of the funds to inject money into banks.
