Andrew Cuomo’s letter to Congress about the Bernanke-Paulson-Lewis conspiracy suggests that Ken Lewis agreed not to kill the Merrill Lynch deal in part to prevent himself and the board from being ousted from Bank of America:
I can’t recall if [Hank Paulson] said “we would remove the board and management if you [invoked the material adverse change clause to block the Merrill deal]” or if he said “we would do it if you intended to.” I don’t remember which one it was, before or after, and I said, “Hank, let’s deescalate this for a while. Let me talk to our board.”
Cuomo concludes that Paulson’s threat, which Paulson has since blamed on Bernanke, “swayed” Lewis:
Secretary Paulson’s threat swayed Lewis. According to Secretary Paulson, after he stated
that the management and the Board could be removed, Lewis replied, “that makes it simple.
Let’s deescalate.” Lewis admits that Secretary Paulson’s threat changed his mind about invoking
that MAC clause and terminating the deal.
Lewis says that he came to agree with Paulson and Bernanke that invoking the MAC clause would create systemic risk and that that’s why he decided not to kill the Merrill deal. The testimony above suggests that Paulson’s threat to fire him at least contributed to this decision.
Either way–job or systemic risk–Lewis does not appear to have been acting in the best interests of Bank of America shareholders.