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When Things Got Tough Hank Paulson Went Skiing

Hank Paul­son said the unimag­in­able last week. He tes­ti­fied that he was off on ski­ing when he had his famous tele­phone call with Ken Lewis where he strong armed Lewis and Bank of Amer­ica to com­plete the acqui­si­tion of Mer­rill Lynch. Lewis had pre­vi­ously tes­ti­fied that he thought that Paul­son was on a bike ride but as it turns out Lewis was wrong and Paul­son cor­rected the record.

Dur­ing his tes­ti­mony Paul­son made it clear that in Decem­ber the United States finan­cial sys­tem was tee­ter­ing on the edge of col­lapse and that if Bank of Amer­ica didn’t fol­low through with its planned acqui­si­tion of Mer­rill Lynch the econ­omy could have been destroyed. Accord­ing to Paul­son it was impos­si­ble to under­es­ti­mate the stakes involved in a bad out­come for Mer­rill Lynch.

But, with the nation’s finan­cial sur­vival in ques­tion, Hank Paul­son, Sec­re­tary of the Trea­sury, went ski­ing. He wasn’t in Wash­ing­ton lead­ing his staff, brief­ing the Pres­i­dent or fig­ur­ing out a good solu­tion to the prob­lem. When he was needed most, Hank Paul­son was hit­ting the slopes.

I almost fell off my chair when I heard Paul­son cor­rect the Con­gress­man that was ques­tion­ing him about where he was when he spoke to Ken Lewis. Paul­son had to repeat it a few times; after all every­one “knew” that he did the call from a bike ride and was only out of the office for some quick exercise.

Of course, Paul­son was in good com­pany on the slopes. Appar­ently nei­ther Ken Lewis nor John Thain thought the merger needed their full time atten­tion. John Thain, CEO of Mer­rill Lynch was off ski­ing in Vail for most of the last half of Decem­ber. Thain defends his deci­sion to not be in the office because he was able to stay in touch through a Black­berry. It’s a won­der he wasn’t fired by Black­berry while enjoy­ing him­self at après ski.

Ken Lewis spent time dur­ing this crit­i­cal period in Decem­ber at Reynolds Plan­ta­tion, a Ritz-Carlton hotel in rural Geor­gia. He also wasn’t a full time CEO dur­ing this crit­i­cal time in Bank of America’s history.

Unbe­liev­ably, nei­ther Ken Lewis, John Thain or Hank Paul­son stayed at their desks until Jan­u­ary when the merger would have been closed. I guess they decided that their leisure time was more impor­tant than the eco­nomic future of a few bil­lion people.

I believe that if Hank Paul­son was in Wash­ing­ton and was work­ing with his staff try­ing to fig­ure out what to do about the Mer­rill Lynch prob­lem he never would have lashed out and threat­ened Ken Lewis. And, I believe that if Ken Lewis and John Thain were work­ing together, in the same office at the same time, they would have been able to work out their dif­fer­ences. Instead, we got absen­tee lead­er­ship and com­mu­ni­ca­tion through Black­berry and e-mail. No won­der the merger got messed up and the recrim­i­na­tions keep on fly­ing around.

Lead­er­ship is a con­tact sport and can’t be done remote con­trol through a Black­berry and a lap top. Lead­er­ship requires a per­sonal con­nec­tion and a ton of effort. Appar­ently, a lot more effort was required than the trio of Paul­son, Lewis and Thain were pre­pared to give to their com­pa­nies or their country.

It was bad lead­er­ship and uncon­trolled hubris that got us into the cur­rent eco­nomic cri­sis and it is going to take a lot of cul­tural change to get us out. Let’s all pray that we have started to write a new chap­ter in U.S. his­tory so that our lead­ers intu­itively under­stand that when the nation’s future is at stake it’s not a good time to go on vacation.

Posted in: Credit Crisis, economy, Executive Fitness, Finance, Politics, Public Policy


  1. Shane Rodgers

    Your arti­cle was great except for one thing: you used the phrase “bad man­age­ment” in the last para­graph. It wasn’t bad man­age­ment — it was NO man­age­ment. These clowns were crim­i­nally neg­li­gent. It is beyond belief to me that none of them, let alone any one of them, was at their desk at such a crit­i­cal time.

  2. Ljiljana R.

    I can’t even remem­ber any­more since when Michael Sav­age began crit­i­ciz­ing Pul­son. Need­less to say, he really, deeply hates him. But, isn’t there a law in U.S. for lack of respon­si­bil­ity and “dri­ving” some­body to dis­as­ter with bad deci­sions. Shouldn’t any of those peo­ple be in court, or in jail?

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