Bank of America chief executive Kenneth Lewis "felt it was his duty to . . . back out of the deal," Republican memos say.
Merrill Lynch buy came after threat, Republicans say
Bank of America CEO allegedly faced ouster by US
WASHINGTON - The Federal Reserve, the US central bank, threatened to force the ouster of Bank of America chief executive Kenneth Lewis if he did not follow through with plans to buy Merrill Lynch & Co., Republicans said yesterday after reviewing internal documents.
Republicans also said there was evidence the government tried to restrict information related to the merger from being made public.
However, none of the documents showed that the government explicitly instructed Bank of America to hide Merrill Lynch's losses from shareholders, they said.
The House Oversight and Government Reform Committee is investigating claims that top government officials, including then-Treasury Secretary Henry Paulson and Fed chairman Ben Bernanke, urged Lewis to go through with the acquisition and not disclose to shareholders details of Merrill Lynch's deteriorating financial state.
Lewis was scheduled to testify today before the panel, which is chaired by Representative Edolphus Towns, Democrat of New York.
Bank of America has received $45 billion from the government's $700 billion Troubled Asset Relief Program. As part of that money, the bank received $20 billion in January after Lewis requested it to help offset mounting losses at Merrill Lynch.
According to an internal memo prepared by the committee's Republican staff, Paulson and Bernanke "put a gun to the head" of Lewis and Bank of America's board of directors to force the merger even though Lewis "felt it was his duty to his shareholders to try his luck in the legal system and back out of the deal."
As proof, Republicans cite several documents including an e-mail by an employee at the Richmond Federal Reserve who said Bernanke had made it clear that if Bank of America backed out and needed financial assistance, "management is gone."
Just a few weeks after the deal was completed, Bank of America's fourth-quarter earnings report showed the hit taken by its balance sheet because of the Merrill Lynch transaction, which made Lewis the target of shareholder anger.
In January, Bank of America reported a $2.39 billion fourth-quarter loss, and Merrill Lynch disclosed a loss of more than $15 billion.