Congress: Who exerted pressue to close B of A - Merrill deal?
A Congressional committee grilled Bank of America CEO Ken Lewis today about the days leading up to the close of the bank's deal to buy the troubled brokerage Merrill lynch. WFAE's Simone Orendain reports: The merger agreement between Bank of America and Merrill Lynch was formed in a rushed two-day negotiation. Three and a half months later, Ken Lewis called financial regulators wanting out. Today, the House Oversight Committee scrutinized what transpired in those talks. Committee Chairman Edolphus Towns started with this question about the acquisition, which received bailout money: "The treasury department had provided $20 billion for a shotgun wedding. But the question may be, who was holding the shotgun?" Towns and others asked whether Ken Lewis felt pressured by then-Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke to complete the transaction. Lewis said it was best to describe what happened and let others come to their own conclusion. At the same time, he did acknowledge the regulators threatened to remove him and the bank's board if he didn't go through with the deal. But Lewis testified that's not why he went ahead with it. He said, "What gave me concern [was] that they would make that threat to a bank in good standing. So it showed the seriousness with which they thought we should not call a MAC." A Material Adverse Change clause or MAC allows a buyer to back out of the deal or change terms before the acquisition closes. Lewis says he wanted to invoke the clause after he learned Merrill's fourth quarter loss would be much greater than bank officials originally assessed. Several committee members said it was hard to believe that Lewis didn't know right away about the extent of Merrill's $12 billion loss.