Former Treasury Secretary Henry Paulson gave his testimony on the BofA/Merrill deal to the House Committee on Oversight & Government Reform this morning, and he’s still being cross-examined now, a couple of hours later. Watching it, the only thing that comes to mind is a little lesson from the movie Clear & Present Danger. In that movie, CIA director Jack Ryan (Harrison Ford) is taught a lesson by his colleague and nemesis Robert Ritter (Henry Czerny)—when they’re facing heavy scrutiny from The Hill, he tells Jack: “‘I have no recollection Senator.’ That’s a phrase you’re going to have to learn.”
It’s a phrase Hank Paulson certainly knows, and that’s all he’s done in the Q&A following his testimony. The movie reference seems appropriate here because this “grilling” of Paulson is pure political theater. Nothing seems likely to come of this. A lot of positioning opportunities for lawmakers to look tough to their constituents, but in the end, the Bank of America/Merrill Lynch is done—and was done in a crisis. Easy to say that it didn’t need to happen so forcefully now that things are (sort of) stabilizing, but the credit crisis that’s now two years old was in fact at an inflection point last September when all this began, and if Merrill wasn’t strongly encouraged to fold into BofA, things could have been a lot worse. We take more confidence in Paulson’s testimony as a lifetime dealmaker and the man in charge of the triage operation last Fall than we do in Representatives who don’t understand the details.