Bernanke, a Machiavellian Schemer?

The finger-pointing seems to have just begun in the months-old acquisition of Merrill Lynch by Bank of America (BAC)—and now in the spotlight is Federal Reserve Chairman Ben Bernanke. Today, the papers report, Bernanke will testify in front of the House oversight and government reform committee on the Fed's role in the messy takeover, as Republican lawmakers accuse him of orchestrating a cover-up of Merrill's worsening financial situation. Bernanke has denied any wrongdoing. "Lawmakers, especially House Republicans increasingly hostile to the Fed, are expected to ask Mr. Bernanke about [Bank of America CEO Kenneth] Lewis's previous suggestion that the government pressured him to not disclose details about the discussions, and that officials made clear they would consider ousting management," the Wall Street Journal writes. According to Reuters, former U.S. Treasury Secretary Henry Paulson has also been called to testify before Congress next month. No date has been set for his testimony. Democratic Rep. Edolphus Towns of New York, who heads the committee, said in a statement. "I am not going to prejudge these issues. We are not even close to finishing the Bank of America-Merrill Lynch investigation at this point."

The New York Times zeros in the politics of the matter, saying that the Republicans' attack on Bernanke, one of their own, has Democrats coming to his defense. It writes: "A memo written by Republicans, citing e-mail and internal Fed documents that were subpoenaed from the central bank, is building a case that Mr. Bernanke was a Machiavellian autocrat who forced Bank of America to go through with a disastrous merger that it no longer wanted to complete. But the committee's Democratic chairman, Representative Edolphus Towns of New York, is investigating whether Bank of America executives were engaged in an elaborate shakedown, demanding that the Fed and the Treasury provide more than $100 billion in fresh capital and guarantees against the losses that were building up at Merrill Lynch."

In separate Fed news, Bloomberg reports that Federal Reserve policymakers voted yesterday to "maintain the size and pace of their $1.75 trillion program to buy mortgage debt and Treasuries" and will keep its key interest rate near zero. The measure, or lack thereof, was taken as the central bank cited a more optimistic outlook on the longevity and breadth of the recession, and a lack of serious concern for impending inflation. "By buying government bonds and mortgage-backed securities, the Fed helps raise these instruments' prices and drive down yields. The moves have lowered the interest rates that borrowers pay on everything from car loans to home mortgages, providing a spark for economic recovery," the WSJ explains. According to Bloomberg, the measure indicates that policymakers "need more time to assess the prospects for a recovery starting in the second half of the year before deciding to embark on any exit from their unprecedented credit programs." However, "complicating their task is an increase in Treasury yields, which yesterday's message failed to stem: 10-year rates rose five basis points, the most in almost a week, and a further two basis points to 3.71 percent today."

In another Bloomberg story, the site takes a look at a massive PR campaign being mounted by Wall Street's largest trade group, the Securities Industry and Financial Markets Association, "to counter the ‘populist' backlash against bankers." SIFMA represents about 600 securities firms, brokerages, and asset-management companies, including Goldman Sachs Group (GS), Citigroup (C), and JPMorgan Chase (JPM). The campaign will target policymakers and the media in New York, London, Washington, and Brussels. In the United States, part of the strategy will be to have regional securities firms and brokers, "many of which have escaped notoriety in the financial crisis," communicate with their local members of Congress the financial industry's willingness to accept needed change. To spearhead the effort, two former aides to Treasury Secretary Henry Paulson have joined the organization, which has also enlisted a number of advisers, including Democratic polling company Brilliant Corners Research and Strategies at $5,000 a month.

Lastly, in oil news, Ericsson (ERIC) Chief Executive Carl-Henric Svanberg has been named chairman of BP (BP) "in a surprise appointment that ends the oil major's lengthy search for a new chairman," Reuters writes. He will step down at Ericsson at the end of the year and fill the post currently held by Peter Sutherland at BP in January. Replacing Svanberg will be Ericsson's current CFO, Hans Vestberg. "The surprise appointment ends a fraught recruitment process at BP" that has delayed Sutherland's departure from the company almost a year, the article reports. BP initially selected Rio Tinto's (RIO) then-Chairman Paul Skinner, a former Royal Dutch Shell (RDS.A) executive, to fill the job, but Skinner withdrew "following investor unease over Rio's plan to sell $19.5 billion in assets and bonds to Chinese state-owned aluminum group Chinalco." Skinner has since left his post at Rio, and earlier this month, Rio dropped the Chinalco deal. Always the extrapolator, the Journal says that the move "shows how eager western majors are to position themselves as technology companies rather than straight-forward oil-and-gas producers, especially at a time when Big Oil is under pressure to help fight global warming by investing in green energy and high-tech solutions to climate change such as carbon capture and storage."