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Ken Lewis defends Bank of America’s role in Merrill Lynch acquisition

Ken Lewis, the former chairman and chief executive of Bank of America Corp. who was ousted in April, is slated to testify about the bank’s acquisition of Merrill Lynch in front of the House Oversight and Government Reform Committee’s Domestic Policy Subcommittee tomorrow.

Ken Lewis, the former chairman and chief executive of Bank of America Corp. who was ousted in April, is slated to testify about the bank’s acquisition of Merrill Lynch in front of the House Oversight and Government Reform Committee’s Domestic Policy Subcommittee tomorrow.
The hearing is titled: “Bank of America and Merrill Lynch: How Did a Private Deal Turn into a Federal Bailout?”
Just yesterday, the Federal Reserve agreed to turn over the documents subpoenaed by the committee, said Kurt Bardella, spokesman for the ranking member of the committee, Rep. Darrell Issa, R-Calif.
“The marriage between Bank of America and Merrill Lynch was a shotgun wedding pushed by the Federal Reserve,” Mr. Issa said in a statement released yesterday.
According to an advance copy of the testimony Mr. Lewis is expected to deliver Thursday, Bank of America decided to buy Merrill Lynch “because we saw the potential benefits … and we did so without any promise or expectation of government support.”
Bank of America’s shareholders approved the transaction in December, after which he “became aware of significant, accelerating losses at Merrill Lynch,” he is expected to say.
Bank officials then contacted Treasury Department and Federal Reserve officials to let them know they had concerns about closing the transaction, Mr. Lewis wrote.
Bank of America even considered declaring a material adverse change that could have scuttled the deal, he wrote.
Department of the Treasury and Federal Reserve representatives asked Bank of America to delay the action, and the bank “expressed significant concerns about the systemic consequences and risk to Bank of America of pursuing such a course,” Mr. Lewis continued.
The company held discussions with the government to determine whether government support could limit the risk of buying Merrill Lynch, he said.
“Both the government and Bank of America were aware that the global financial system was in fragile condition and that a collapse of Merrill Lynch could hasten a crisis,” Mr. Lewis said.
Bank of America concluded that there were “serious risks” to declaring a material adverse change, and the proceeding with the transaction with government support “was the better course,” he said. “Even six months later it is easy to forget just how close the brink our system came.”
Bank of America Corp. of Charlotte, N.C., purchased Merrill Lynch & Co. Inc. of New York in January, when the bank received $20 billion from the federal government to help offset losses in incurred partly as a result of the purchase.