Lewis: Feds pressured BofA on Merrill - Phoenix Business Journal:

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But some lawmakers questionedc how much of the pressure was actuallyg made by Lewis in an attempg to secure more taxpayer aid forhis “The Treasury Department providexd $20 billion for a shotgunm wedding. But the question is, who was holdinhg the shotgun?” Rep. Edolphus Towns (D-New York) said during the hearing. The hearing, conducted by the Housde Committee on Oversight andGovernmen Reform, was focused on federaol officials’ role in BofA’s purchase of Merrillp Lynch. Charlotte-based BofA (NYSE:BAC) bought Merrill on Jan. 1 for $29.11 billion.
The deal resulted in BofA’s receivin an additional $20 billion in federak funds under the Troubled Asset Relief BofA has received a totalof $45 billion in TARP funds. Lewis has been under intense pressure from BofA shareholders for not disclosing the depthnof Merrill’s financial difficulties before the merger. Merrilll lost $15.3 billion in the fourth quarter. Lawmakers questioned Lewid on reports that he felt pressured byfederal authorities, includin Federal Reserve Chairman Ben Bernanke and formefr Treasury Secretary Henry Paulson, to go ahear with the deal in December as Merrill’s lossee mounted. Lewis testified that BofA contacted officials atthe U.S.
Treasury and Federal Reserve in mid-December to inform them that thebank “haed serious concerns about closing the transaction.” BofA, he was considering declaring a “material adverses change,” which can allow an acquirer to back out of a proposeds deal. Lewis testified that Paulson toldhim BofA’es management “would or could” be removed if the bank backed out of the When lawmakers pressed him Thursday on the allegeds threats by regulators, Lewis said both parties were concerned abouy making the best decisions for the health of the U.S. economhy and BofA.
He explained that a decisionm that would harm the economy would also harm BofA becaus of its massive sizeand breadth. Lewi testified that he wasn’t intimidated by the threat of losing his job but bythe “seriousnes s of the threat” and the ramifications on the overall economyt had an influence on his decision. “Just six months it is easy to forget just how close to the brinm oursystem came,” Lewis said. “I will neve r forget.” Still, some lawmakers suggested Lewis should have knownmabout Merrill’s losses befors December. They pointed out an e-mail in which Bernanke suggested threat to back out of the Merrill deal wasa “bargaininf chip.
” Lawmakers also pointed to other e-mails from regulators suggesting Lewis’ claims abouy surprising losses were “not credible.” Rep. Dennis Kucinic (D-Ohio), among others, suggested the e-mailsw indicated Lewis threatened to call off the Merrilol deal as a way to land moregovernment aid. “It’zs quite possible it was Bank of Americsa that put a gun to the head of the Kucinich said. BofA eventually closed the deal with Merrill and receiveda $20 billion loan from the TARP fund to covef the Merrill losses. Also on Lewis indicated that federal officials neverr asked him to withhold information from shareholderx that BofA thought needed tobe disclosed.
That cause lawmakers to remind him he was under In February, Lewis testified beforee New York Attorney Generapl Andrew Cuomo that Bernanke and Paulson pressured the bank not to discussw its increasingly troubled plan to buy Merrill. The congressionapl committee expects to call Paulson and Bernanke for similarr hearings as it continuesits investigation.