The Federal Reserve chairman, Ben Bernanke, has denied – over and over again, under a barrage of hostile questions – ever threatening to oust Ken Lewis as head of Bank of America when he was considering pulling out of the deal to buy Merrill Lynch.
While the central bank boss usually travels to Capitol Hill to dispense economic wisdom, Mr Bernanke was yesterday grilled by lawmakers who are concerned about what they see as an over-mighty and out-of-control Fed.
At issue were the events of last December, when BoA was considering trying to get out of its acquisition of Merrill because of spiralling losses at the investment bank. At stake now are plans to give the Fed more power to regulate systemically important financial firms, and even Mr Bernanke's reappointment for a second term when his first runs out next January.
Mr Lewis told the New York attorney general, Andrew Cuomo, this year that Mr Bernanke and the then Treasury Secretary, Hank Paulson, said he and the board could be ousted if they tried to pull out of the Merrill acquisition. However, in testimony before the House oversight committee this month, Mr Lewis characterised the understanding that his job was at risk as "pressure" rather than a "threat".
Taking his turn before the committee yesterday, Mr Bernanke said repeatedly that he did not make any threat to oust Mr Lewis, and did not ask Mr Paulson to do so either – but he added that one of his arguments was that walking away from Merrill would damage management's credibility.
The Fed has the power to request management changes at banks, and has demanded that BoA hire a better cadre of non-executive directors with banking industry experience. Given that the Fed clearly had that power, asked Republican Jason Chaffetz, "how is that not a threat?"