Lewis defends Merrill deal to US Congress
Bank of America chief insists takeover deal was not forced on him by the Fed
Friday 12 June 2009
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."
- 3 Alton Towers crash: Four seriously injured and 16 guests trapped as Smiler ride carriages collide
- 4 Gay teenager 'forced to have sex with his own mother' to 'cure' his homosexuality, campaigners in India say
- 5 Ann Summers survey reveals the UK's favourite sex position
Man on naked bike ride gets ejected after becoming aroused
Caitlyn Jenner's mother Ester thought her daughter, formerly known as Bruce Jenner, had transitioned for money
Charles Kennedy 1959-2015: A gifted, compassionate politician whose career was cut short by the 'demon drink' - latest news
Alton Towers crash: Four seriously injured and 16 guests trapped as Smiler ride carriages collide
Gay teenager 'forced to have sex with his own mother' to 'cure' his homosexuality, campaigners in India say
Thousands of teenage girls enduring debilitating illnesses after routine school cancer vaccination
Migrants in Kos: Photos show real tragedy after Brits abroad complain of 'awkward' holidays
British tourists complain that impoverished boat migrants are making holidays 'awkward' in Kos
Michael Gove determined to scrap the Human Rights Act – even if Scotland retains it
Threat to scrap Human Rights Act could see UK follow Nazi example, warns UN official
Church of England 'one generation away from extinction' after dramatic loss of followers
iJobs Money & Business
£30000 - £35000 per annum: Recruitment Genius: The UK's fastest growing, multi...
£70000 - £90000 per annum: Recruitment Genius: A Financial Reporting Manager i...
£23000 - £25000 per annum: Recruitment Genius: They win lots of awards for the...
£13500 - £20000 per annum: Recruitment Genius: This nationwide enforcement com...