Bank of America is having a bad week. First there was the letter from Cuomo. And now Congressman Edolphus Towns is going after the bank.
Towns, who chairs the Committee on Oversight and Government Reform, is focused on what he calls a “ring-fencing agreement” under which the US government agreed to backstop $118 billion of Bank of America’s capital markets exposure.
He says the bank is now attempting to pretend that the agreement was never really in place.
From Towns’ statement today:
“Bank of America has conveniently erased from its memory the terms of the ringfencing agreement. It seems that the bank wants to have it both ways – all the benefits of government insurance without having to pay a dime for all of its benefits.”
Towns says that while BofA previously recognised the agreement, Ken Lewis now refers to it as a “proposed agreement.”
Towns says this is just nonsense. In a letter sent to Lewis in July, Towns explained that the “ring-fencing” of Bank of America’s toxic assets provided financial stability to Bank of America “at a very crucial time for the company,”
From the letter:
Apparently, Bank of America believes it has the right to back out of this deal with the government because the agreement was never signed. If this is true, I must note the irony of such an argument. As you have stated under oath, Federal Reserve Chairman Ben Bernanke and then-Treasury Secretary Hank Paulson made verbal commitments to you in December of 2008 to provide Bank of America with billions of taxpayer dollars to help your bank absorb the losses at Merrill Lynch. What would have happened to Bank of America if the government had not honored the verbal commitments you say were made to you
For his part, Lewis say Bank of America was just negotiating for a fair price to pay for the guarantee, not trying to back out of the deal.
“As you know, bank and government representatives are currently in discussions about the degree to which the bank should compensate the Government. Those discussions have been thoughtful and professional and are continuing this week. We are committed to achieving a resolution of this issue and we are confident that we will meet that objective,” Lewis wrote to Towns.
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