Federal Reserve Chairman Ben Bernanke and former Treasury Secretary Henry Paulson will be asked to testify before Congress on their role in Bank of America's
At a congressional hearing on Thursday into the government's role in last year's purchase, the Democratic chairman of a key House panel said Bernanke and Paulson must address allegations they improperly pressured Bank of America to complete the deal.
We will be looking for some answers to puzzling questions, said Edolphus Towns, Democratic chairman the U.S. House Oversight and Government Reform Committee.
Did Paulson and Bernanke abuse their authority by ordering Mr. Lewis to go through with the Merrill acquisition, or did Mr. Lewis threaten to back out in order to squeeze more money out of the federal government? Towns asked.
Bank of America Chief Executive Ken Lewis, the sole witness at the hearing, agreed with lawmakers under questioning that there was pressure from the government to complete the deal despite growing losses at Merrill.
But it was in the context of them thinking it was in the best interests of Bank of America and the financial system, Lewis said.
The threat was not what gave me concern. What gave me concern was that they would make that threat to a bank in good standing, Lewis said.
Republican investigators on the committee prepared a briefing paper that accused Paulson and Bernanke of putting a gun to the head of Lewis and Bank of America's board.
This transaction took place in a climate of fear and intimidation by government officials, said Republican Representative Jim Jordan of Ohio.
The panel is examining the government's role in the January 1 purchase of Merrill Lynch, and the $20 billion in additional taxpayer bailout money given to Bank of America that month.
Lewis agreed to buy Merrill Lynch last fall in a deal put together with Treasury's assistance as Wall Street and the U.S. economy fell into a deep tailspin. Shareholders of Bank of America and Merrill voted in favor of the companies' merger last December 5.
Lewis has said it was only later that month that he learned how fast Merrill was deteriorating, and then threatened to pull out of the merger, with officials of the Treasury and the Federal Reserve pushing for completion of the deal.
Lawmakers repeatedly said Lewis must have known much earlier than he claims about the heavy losses at Merrill, which lost $15.84 billion in the fourth quarter of last year.
But Lewis said nobody predicted the meltdown that occurred in the fourth quarter of 2008.
(Additional reporting by Mark Felsenthal; Editing by Tim Dobbyn)