The saga continues today…
WASHINGTON (AP) — A House oversight panel is examining the $45 billion federal bailout of Bank of America Corp. and its shotgun acquisition of Merrill Lynch & Co. last year at the height of the financial crisis.
The House Oversight and Government Reform Committee has been investigating the government’s role in pushing the hastily arranged takeover of Merrill Lynch, the tumultuous events surrounding the deal and the payment of billions of dollars in bonuses to Merrill employees. The panel has previously asked Charlotte, N.C.-based Bank of America, the second-largest U.S. bank, to hand over related documents.
The committee is scheduled to hold a hearing at 10 a.m. EST Tuesday. The slated witnesses are four Bank of America officials: Brian Moynihan, president of consumer and small-business banking; former general counsel Timothy Mayopoulos; and current board members Charles “Chad” Gifford and Thomas May.
Moynihan is considered by analysts to be a leading candidate to replace Ken Lewis, the CEO who is leaving the bank on Dec. 31. Lewis’ decision announced in September capped a year when he faced shareholder fury and regulatory scrutiny, and was stripped of his chairman post.
Committee Republicans are angered that no government officials have been called to testify at Tuesday’s hearing. They are seeking the testimony of Treasury Secretary Timothy Geithner; Sheila Bair, chairman of the Federal Deposit Insurance Corp.; Securities and Exchange Commission Chairman Mary Schapiro; and former SEC chairman Christopher Cox.
“By failing to call government witnesses to this hearing, the committee is abdicating its responsibility to oversee the government policies and actions that shaped the Merrill Lynch acquisition,” Rep. Darrell Issa of California, the panel’s senior Republican, said in a letter Monday to Chairman Edolphus Towns, D-N.Y.
The Merrill deal was first questioned after Bank of America disclosed that the investment bank’s losses were far more than expected. Bank of America then asked for and received $20 billion from the government’s bailout fund in addition to the initial $25 billion, in part to offset those losses. Merrill lost $15 billion in the fourth quarter and more than $27 billion for the year.
Lewis came under even greater attack after Merrill, with the knowledge of Bank of America executives, gave billions in bonuses to its employees even as Bank of America asked for more rescue money from the government. The deal was forged a year ago and completed on Jan. 1. The bonuses, which would normally have been paid in January, were paid out in December.
In September, New York Attorney General Andrew Cuomo subpoenaed five members of Bank of America’s board as part of an investigation into the Merrill deal.
Bank of America had settled a separate investigation in September into disclosures about the Merrill bonuses with the SEC, but a federal judge said the $33 million accord was unfair and needlessly penalised the bank’s shareholders. The judge ordered the case to go to trial on Feb. 1.