Why was Bank of America (BAC) CEO Ken Lewis so paranoid about losing his job if he defied regulators by wiggling out of the Merrill deal?
Well maybe because he was threatened.
At least that’s what Hank Paulson is going to tell Congress tomorrow:
BBC: Hank Paulson warned the bank’s chief executive Kenneth Lewis that the Federal Reserve could oust him and the board if the rescue did not proceed.
The Fed had previously denied putting pressure on anyone to seal the deal.
Bank of America (BoA) bought Merrill during the height of the financial crisis and suffered severe losses.
Mr Paulson, in prepared congressional testimony, said that the merger was in the best interest of the US and the two firms, adding that remarks he made during discussions of the deal were “appropriate”.
He added that it would be “unthinkable” for BoA to walk away – a step he described as “destructive action for which there was no reasonable legal basis and which would show a lack of judgment”.
Theoretically, we suppose, this resolves the dispute between Bernanke and Lewis. Paulson seems to be saying: Yes, Lewis was threatened, and no it wasn’t Bernanke — so neither one commited perjury.
And since it’s true that Lewis didn’t have much legal ground to stand on — bad results due to market conditions did not qualify as a materdial adverse event — then Paulson can legitimately say: hello, I was doing my job.
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