Among some of the discoveries of the financial crisis is that the entire financial system is now, following the Lehman bankruptcy, built entirely on fraud. And while Ken Lewis may spend the remainder of his days on some private island with stolen taxpayer money providing for his every last wish, it was he, in following the Fed's and the Treasury's orders to make a mockery of fiduciary responsibility, that was among the first people to confirm that there is no rule of low in America, or rather whatever law there is, it only applies to the less than immortal (i.e. the sub-banker class). Below, in an indication that Zero Hedge will never forget, we present the salient highlights from the Ken Lewis deposition on the MAC clause surrounding the Merrill transition, emphasizing the threats from Hank Paulson and Ben Bernanke. For as long as neither of these three is in jail for what is documented shareholder (and taxpayer) fraud, we fail to see why the remaining 300+ million Americans continue to diligently pay their share of taxes into a government that is now beyond (and in full documentation) corrupt. Also, how BofA's lawyer Wachtell was not at all present during the discussion of the MAC clause, makes a complete mockery of the US legal process in its entirety. We wonder just when the official scribe of the kleptocracy, Andrew R. Sorkin, will write a book disclosing the truth of what happened, including a listing of all the laws broken with full premeditation by every single player, and not the watered down, PG13 (and rather expensive)version that makes everyone come out like a law-abiding superman.

Full transcript highlights, presented without commentary:

Q: Where does the meeting take place?

A: At the Federal Reserve.

Q: And who attends the meeting?

A: Well, the two main players – excuse me – Joe Price and Brian Moynihan. And Bernanke was there; Paulson was there; Alvarez, his chief counsel, and a cast of a lot of others that I didn’t recognize.

Q: The “others” were Treasury and Fed officials?

A: Yes

Q: Was there any attendance list taken at the meeting?

A: Not to my knowledge, but there could have been.

Q: No one passed around a list or something like that?

A: No.



A: ...we were concerned about the very large hole that would have been created by the loss.

Q: And what was the hole that was going to be created by the loss?

A: At that point, we thought it was roughly $12 billion.



Q: What happened next?

A: Well, there was discussion about MACs being very difficult – and, again, the meetings are running together on me – I don’t know what would be the remedy –I know at the end we were basically told to stand down...

Q: Who did speaking for the Treasury and the Fed at the meeting?

A: Mainly Hank and Ben, but I think Alvarez said a few things, too

Q: By the way, was anyone from Wachtell at the meeting?

A: No.



A: ...I think I got it now. I remember, for some reason we wanted to follow up and see if any progress – as I recall, we, actually had not agreed not to call a MAC after the conversation that we had, and so I tried to get in touch with Hank, and, as I recall, I got a number that was somebody at the Treasury kind of guard-like thing. He had a number for Hank, and Hank was out, I think, on his bike, and he – this is vague; I won’t get the words exactly right – and he said “I’m going to be very blunt, we’re very supportive of Bank of America and we want to be of help, but” – I recall him saying “the government,” but that may or may not be the case – “does not feel it’s in your best interest for you to call a MAC, and that we feel so strongly,” – I can’t recall if he said “we would remove the board and management if you called it” or if he said “we would do it if you intended to.” I don’t remember which it was, before or after, and I said, “Hank, let’s deescalate this for a while. Let me talk to our board.” And the board’s reaction was one of “That threat, okay, do it. That would be systemic risk.”



Q: The conversation with Hank on the bike, that’s also on Monday?

A: No. That was on Sunday – I’m pretty sure that was Sunday. I just recall it wasn’t a weekday, and that he was out of pocket.



Mr. Corngold: Before we do that, did you have an understanding of what powers the Treasury Department had to remove the board and/or the management of the bank?

The Witness: It was my understanding he said – that’s why I said I think he said government. I think – my impression is that was the language of the Fed used to use in Texas, basically saying, Don’t do something.

Mr. Corngold: You had an understanding that the Fed could remove the board and/or the management of a bank that it regulated if it found certain things.

A: Yes

Q: Do you know what it has to find?

A: They had been so strong about the fact that they strongly advised use not to do it and that it would cause harm to the bank and the system and they system wouldn’t be good for us, either – that it would damage the system. That’s kind of how it was being portrayed.

Q: Was this the first you heard about the government – to use your term – was considering that threat.

A: Yes



Q: Did you ask him, “By the way, what do you mean by that” – I’m sorry, the comment about the removal?

A: No. It was pretty clear.

Q: And at the time, did you sort of have that preexisting understanding of the Texas Fed way of communicating.

A: I had heard that at some point. I don’t know why that’s in my mind, but I’ve heard of that before that’s a way of telling you not to do something.

Q: Have you heard any kind of communication like that from a federal official to you before?

A: No



A: This was about just a shear magnitude of loss, and either you do it or you don’t. Behavioral changes, or whatever, wouldn’t fill that hole that we thought was $12 billion, which turned out to be $15 billion.



Q: But you, basically had to go on faith that the Fed and Treasury were going to deliver.

A: Correct.

Q: Did you ask for any agreement from them?

A: There was a point after that that the board brought up the fact that we’re relying on words that obviously has some very prominent people and honorable people, but, boy, what if they don’t come through? So I called Bernanke – I don’t know why I called him versus Hank – and said, “Would you be willing to put something in writing?” And he said, “Let me think about it.” As I recall, he didn’t call me back, but Hank called me back. And Hank said two things: He said, “First, it would be so watered down, it wouldn’t be as strongly as what we were going to say to you verbally, and secondly, this would be a disclosable event and we do not want a disclosable event.”



Q: They didn’t think it was in the best interest if you announced to your shareholders that you were negotiating?

A: No. They thought it was in our best interest for the deal to be completed and to be able to say “This is what we have,” as opposed to prospectively.



Q: At the point in time of this board meeting, though, you were relating to the board that you felt you had a commitment from the Fed and the Treasury to make good on whatever harm is caused by the increased losses at Merrill Lynch; is that right?

A: I had verbal commitments from Ben Bernanke and Hank Paulson that they were going to see this through, to fill that hole, and have the market perceive this as a good deal.





Q: Did you ask anyone to look into whether the oral, verbal commitments from the Fed and Treasury were enforceable?

A: No. I was going on the word of two very well respected individuals high up in the American government.

Q: Wasn’t Mr. Paulson, by his instruction, really asking Bank of America shareholders to take a good part of the hit of the Merrill losses?

A: What he was doing was trying to stem a financial disaster in the financial markets, from his perspective.

Q: From your perspective, wasn’t that one of the effects of what he was doing?

A: Over the short term, yes, but we still thought we had an entity that filled two big strategic holes for us and over the long term would still be an interest to shareholders.

Q: What do you mean by “short term”?

A: Two to three years.

Q: So isn’t that something that any shareholder at Bank of America who had less than a three-year time horizon would want to know?

A: The situation was that everyone felt like the deal needed to be completed and to be able to say that...

Q: When you say “everyone,” what do you mean?

A: The people I was talking to, Bernanke and Paulson.

Q: Had it been up to you would you made the disclosure?

A: It wasn’t up to me.

Q: Had it been up to you.

A: It wasn’t

Q: Why do you say it wasn’t up to you? Were you instructed not to tell your shareholders what the transaction was going to be?

A: I was instructed that “We do not want a public disclosure.”

Q: Who said that to you?

A: Paulson



Q: Did anyone consider that the oral agreement was a commitment for financing, so under SEC rules there had to be a disclosure?

A: I did not. That’s all I can tell you.



A: Plus, it was said that “We want this deal done on time on these terms.” There wasn’t an ability to renegotiate.



Q: Did you feel like you had a choice in the matter?

A: No