Bank of America’s (BAC) Chief Executive Ken Lewis says he was pressured by Fed Chairman Bernanke and then-Treasury Secretary Paulson to not discuss BofA’s increasingly troubled plan to buy Merrill Lynch, the WSJ reported Thursday.
From The WSJ: Mr. Lewis, testifying under oath before New York’s attorney general in February, told prosecutors that he believed…Paulson and Bernanke were instructing him to keep silent about deepening financial difficulties at Merrill….As part of his testimony, a transcript of which was reviewed by the Journal, Mr. Lewis said the government wanted him to keep quiet while the two sides negotiated government funding to help BofA absorb Merrill and its huge losses.
Late last year, Wall Street was crumbling and BofA faced intense government pressure to buy Merrill to keep the crisis from spreading. Disclosing losses at Merrill — which eventually totaled $15.84 billion for the fourth quarter — could have given BofA’s shareholders an opportunity to stop the deal and let Merrill collapse instead.
“Isn’t that something that any shareholder at Bank of America…would want to know?” Mr. Lewis was asked by a representative of New York’s attorney general, Andrew Cuomo, according to the transcript.
“It wasn’t up to me,” Mr. Lewis said. The BofA chief said he was told by Messrs. Bernanke and Paulson that the deal needed to be completed, otherwise it would “impose a big risk to the financial system” of the U.S. as a whole.
The testimony for the first time spreads some of the blame to….Paulson and Bernanke for Mr. Lewis’s decision to keep problems at Merrill under wraps.
If Lewis’ story doesn’t change, then this will be the most fascinating shareholder lawsuit ever. Another thing worth mentioning is that I find it quite disturbing that an extremely wealthy and prominent business leader like Lewis can’t find the presence of mind and courage to stand up for what he knows is right and defend the interests of his company and those of his shareholders. Truly mind-boggling. It’s hard to admit, but the ethical and moral costs we are currently experiencing as a society are deeply disturbing.