The US government did not force Bank of America to consummate its controversial takeover of Merrill Lynch in the dying days of 2008, the bank's embattled chief executive Ken Lewis insisted at a fiery hearing on Capitol Hill, but rather persuaded him that it was in the best interests of shareholders.
Mr Lewis sought to diffuse the gathering political row over the role of the Treasury and the Federal Reserve in the takeover, and about whether the Fed chairman Ben Bernanke and then Treasury secretary Hank Paulson had bullied the company into a deal to protect the wider financial system.
Flanked by advisers and lawyers, Mr Lewis also had to parry accusations that he should have known about Merrill's spiralling losses sooner, and misled shareholders by not disclosing them as soon as he did.
In a plea for understanding, he said all sides acted honourably. "I believe that committed people of good intentions, in both the private sector and the government, worked desperately hard in late 2008 to prevent a collapse of the global financial system that would have resonated throughout the global economy. Even six months later, it is easy to forget just how close to the brink our system came. I will never forget, and I believe those efforts will be well remembered long after any current controversy is forgotten."
BofA threatened to walk away from the acquisition after seeing Merrill's losses swell last December, but eventually went ahead with guarantees that the bank would get federal assistance. In January, it took $20bn in aid from the Treasury, and announced that the government would guarantee tens of billions more in potential losses from Merrill's and BofA's toxic assets.
The $44bn acquisition of Merrill was one of the central events of last autumn's panic, saving the brokerage from potential oblivion but leaving Mr Lewis fighting accusations of recklessness. The events of December, meanwhile, are among the most controversial, the subject of numerous shareholder lawsuits and an investigation by the New York attorney-general Andrew Cuomo.
Lawmakers had subpoenaed the Federal Reserve for emails about the discussions in December, and a number of these showed Mr Lewis in an unflattering light. Mr Bernanke initially dismissed Mr Lewis's claim to invoke a "material adverse change" clause and walk away from Merrill as just "a bargaining chip". Fed officials criticised BofA officials, saying they did not appear to have a handle on the situation at Merrill and saying Mr Lewis had a tendency to be "reckless".
Mr Bernanke threatened to remove the BofA board if it did not complete the Merrill deal and then needed additional government aid, but Mr Lewis yesterday declined to characterise that as "pressure". He said the board agreed that not doing the deal could upset "fragile" capital markets and rebound on BofA itself. "It is hard to find the exact word to describe what I have just described. It is best just to describe it and let people come to a conclusion."
Dennis Kucinich, a Democrat on the House oversight committee, claimed the Fed's emails show BofA was using the threat to walk away to get aid to cover losses it was experiencing on its own assets. Mr Lewis said the asset positions of Merrill and BofA were like "apples and oranges". Mr Kucinich countered, "More like rotten apples and rotten oranges."