Get ready for some fireworks up on The Hill today, as Bank of America (BAC) CEO Ken Lewis will appear to discuss his bank’s tumultuous acquisition of Merrill Lynch last year.
The big concerns surround the Fed and the Treasury and what role they had in forcing Bank of America to go through with the deal.
Judging by leaked portions of his testimony, it sounds as though Lewis will try to take a middle ground, not really accusing the government of strong-arming him.
Bloomberg: Upon learning of the losses, which culminated in a fourth- quarter deficit for Merrill of more than $15 billion, Lewis said the bank considered declaring a “material adverse change” clause that could have allowed Bank of America to end the pending deal.
At that point, “We commenced discussions to determine whether governmental support could limit the risk of proceeding with the transaction,” Lewis said in the prepared testimony.
“Officials of the company, the Treasury Department and the Federal Reserve discussed a plan to close the transaction, with the government providing assistance,” he said. “Bank of America concluded that there were serious risks to declaring a material adverse change, and that proceeding with the transaction, with governmental support, was the better course.”
What does that mean? Not really sure. What we want to know — and what we suspect Congress will ask him about pointedly if it doesn’t come up in his prepared testimony — is whether the government made any threats, such as that Lewis and the board would be canned if he tried to back out of the deal. That was the story that emerged in April.
Last night, the House said it had subpoenad documents from the Federal Reserve pertaining to the matter.