- The Washington Times - Friday, April 24, 2009

CHARLOTTE, N.C. (AP) | New York’s attorney general said Thursday that government officials pressured Bank of America Corp. CEO Ken Lewis to complete the bank’s purchase of Merrill Lynch and threatened the bank chief’s job security to do so.

A letter from New York State Attorney General Andrew Cuomo’s office sent Thursday to congressional leaders and federal regulators said Mr. Lewis testified in February that former Treasury Secretary Henry M. Paulson Jr. and Federal Reserve Chairman Ben S. Bernanke threatened to oust Bank of America’s management if the bank tried to back out of buying Merrill Lynch.

The government helped orchestrate the acquisition of the investment bank by Bank of America over the same weekend in September that another investment bank, Lehman Brothers, went under, setting off one of the most intense periods of the financial crisis.

Bank of America has repeatedly defended its acquisition to shareholders and investors amid revelations of huge losses at Merrill Lynch before completion of the deal.

“We believe we acted legally and appropriately with regard to the Merrill Lynch transaction,” Bank of America spokesman Scott Silvestri told the Associated Press on Thursday.

Mr. Lewis has conceded in recent months that he had trepidations about completing the purchase of Merrill Lynch. In December, just before it was sold to Charlotte, N.C.-based Bank of America, Merrill Lynch said it lost more than $15 billion in the fourth quarter.

According to testimony, Mr. Lewis had several discussions with government officials over his concerns about the deal, including his desire to scuttle it. Purchase deals typically allow companies to back out if there are significant changes in operations or performance. But Mr. Paulson advised Mr. Lewis in late December that if Bank of America terminated the deal, the company’s management and board would be replaced.

Mr. Lewis told the attorney’s general’s office during his testimony that Mr. Paulson said to him: ” ‘I’m going to be very blunt, we’re very supportive on Bank of America and we want to be of help, but … we would remove the board and management if you called it.’ ”

Mr. Paulson essentially confirmed Mr. Lewis’ testimony when he was questioned by the attorney general’s office, according to the letter Mr. Cuomo sent to government officials Thursday.

Representatives from the Treasury Department had no immediate comment.

Mr. Bernanke and the Federal Reserve have declined to discuss the conversations with Mr. Lewis over the Merrill Lynch purchase. The Fed has invoked its bank examination privilege to avoid divulging what it told Mr. Lewis to do regarding the purchase of Merrill Lynch, according to the letter.

Mr. Lewis’ testimony came in response to questioning by the New York attorney general’s office about bonuses paid to Merrill Lynch employees in December, before Bank of America completed its acquisition of the investment bank.

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