Maybe now we’ll finally get to the bottom of the convoluted and contradictory stories that have been told about this disasterous merger.
Bank of America Corp (BAC.N) on Friday said Chief Executive Kenneth Lewis will testify in Congress on June 11 about the largest U.S. bank’s purchase of Merrill Lynch & Co, which prompted a federal bailout.
Lawmakers had asked Lewis to appear at a House of Representatives Committee on Oversight and Government Reform hearing to discuss how and when Bank of America knew Merrill was on its way to a $15.84 billion fourth-quarter loss, the government’s role in the January 1 purchase, and a $20 billion taxpayer bailout that the bank got in January.
Rep. Edolphus Towns, who chairs the committee, said he wants to ask Lewis how the transaction became “hinged on the receipt of taxpayer dollars,” and how to avoid a repeat of the “financial disaster” the country has faced over the last year.
Towns also asked Federal Reserve Chairman Ben Bernanke to provide 43 documents related to the merger.
Lewis would be returning to the congressional hotseat four months after he joined seven other bank chiefs before another congressional panel to testify over their use of funds from the federal bank bailout plan, the Troubled Asset Relief Program. Bank of America has taken $45 billion, including the $20 billion in January, of TARP money.
His appearance was announced a day after the Charlotte, North Carolina-based bank named Gregory Curl, who oversaw the purchase of Merrill Lynch and Countrywide Financial Corp, to replace Chief Risk Officer Amy Woods Brinkley. She was forced out after a surge in credit losses led to the government bailout.
Shareholders of Bank of America and Merrill voted in favour of the companies’ merger last December 5. Lewis has said it was only later that month that he learned how fast Merrill was deteriorating, and then threatened to pull out of the merger.
He has said Federal Reserve Chairman Ben Bernanke and then-Treasury Secretary Henry Paulson pushed him to complete the merger, and not to tell investors about Merrill’s losses. A Bernanke representative has disputed this characterization.
According to the Wall Street Journal, Congress is focusing on possible discrepancies between Lewis’ public statements, his testimony before New York Attorney General Andrew Cuomo, and what he told the bank’s board. The bank had no comment.
Regulators last month ordered Bank of America to raise $33.9 billion of capital as a buffer against a deep recession. Bank of America has said it raised nearly all of that sum.
As part of the January bailout, the government agreed to share losses on $118 billion of toxic assets. Lewis said this agreement was not signed and that he does not plan to use it.
According to The New York Times, citing three sources, Bank of America is balking at paying the government a “substantial” sum to exit the agreement. It said regulators contend the bank derived some market value from it, while bank executives say the company’s falling stock price suggests otherwise.
Bank of America shares rose 4 cents to $11.91 in afternoon trading. They traded at $8.32 on Jan 15 just before the bailout was announced, and fell as low as $2.53 on Feb 20.
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