Bank of America Corp Chief Executive Kenneth Lewis has been asked to testify before a congressional committee about when the bank became aware of deteriorating conditions late last year at Merrill Lynch & Co, which prompted a federal bailout.
Separately, the largest U.S. bank is balking at paying a substantial sum to the government to exit an agreement covering losses on troubled assets, and believes it should pay nothing, the New York Times said on Friday, citing three people briefed on the talks.
The news surfaced as Charlotte, North Carolina-based Bank of America this week forced out Chief Risk Officer Amy Woods Brinkley, saying it needed to go in a new direction and focus more on credit issues. It installed Gregory Curl, a top dealmaker, to replace Brinkley. Three directors have left since April, and more changes are expected.
U.S. representatives Edolphus Towns and Dennis Kucinich asked Lewis in a letter on Wednesday to testify about Merrill on June 11 before the House Committee on Oversight and Government Reform. Towns chairs the committee, while Kucinich chairs a subcommittee on domestic policy.
The lawmakers called on Lewis to explain how and when Bank of America knew Merrill was on its way to losing $15.84 billion in the fourth quarter, the government's role in the purchase, and the $20 billion taxpayer bailout of the bank in January. The bank acquired Merrill on Jan. 1.
Separately, the lawmakers asked Federal Reserve Chairman Ben Bernanke to provide 43 documents related to the merger.
The Wall Street Journal said investigators are focusing on possible discrepancies between Lewis' public statements, his testimony before New York Attorney General Andrew Cuomo, and what he told Bank of America's board.
A spokesman for Bank of America said the lender has received the committee's invitation for Lewis to appear and will respond to it shortly. The bank declined further comment.
Lewis was among eight bank chief executives to testify before Congress in February over how they used funds from the federal Troubled Asset Relief Program. Bank of America took $45 billion, including the $20 billion in January.
Shareholders of Bank of America and Merrill voted in favor of the companies' merger last Dec. 5. Lewis has since said it was later that month that he became aware how fast Merrill's finances were deteriorating, and then threatened to pull out of the deal. He has said regulators pushed him to complete the merger, but some regulators have disputed his characterization.
As part of the January bailout, the government agreed to share in losses on $118 billion of toxic assets, three-fourths of which came from Merrill.
Lewis has since said this agreement was never signed and that he does not plan to use it. The Times said regulators contend the bank derived some market value from the agreement because investors knew it was available, but bank executives believe the company's falling stock price suggests otherwise.
Regulators last month ordered the bank to raise $33.9 billion of capital as a buffer against a deep recession. Bank of America has said it raised nearly all of that sum.
Shares of the bank rose 35 cents to $12.22 in pre-market trading. (Reporting by Jonathan Stempel; Editing by Dave Zimmerman and Steve Orlofsky)