- The Washington Times - Thursday, June 11, 2009

Bank of America’s top official told a House investigative panel Thursday that the Federal Reserve threatened to remove top executives at the bank if he backed out of an agreement to buy troubled Merrill Lynch last year.

But bank Chief Executive Kenneth Lewis denied that Fed pressure was the deciding factor in proceeding with the deal, a position met with bipartisan skepticism by members of the House Oversight and Government Reform Committee during a hearing on Capitol Hill.

“The threat was not what gave me concern,” Mr. Lewis said. “What gave me concern was that they would make that threat to a bank in good standing.”

The panel is investigating claims that top government officials, including then-Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke, pressured Mr. Lewis and urged him to keep quiet about Merrill Lynch’s financial problems. Mr. Lewis denied the accusations.

Rep. Elijah E. Cummings, Maryland Democrat, accused Mr. Lewis of not being forthcoming in his description of the Fed’s influence to buy Merrill Lynch.

“We don’t buy it,” he said. “You didn’t feel threatened?”

Mr. Lewis responded that it was a “strong influence on my decision, but it wasn’t the only decision.”

Rep. Jeff Flake, Arizona Republican, also took exception to Mr. Lewis’ assertion that the Fed didn’t threatened him to buy Merrill Lynch, saying that “it just seems like there’s no other explanation.”

“What would be considered a threat?” Mr. Flake added. “Kidnap the family dog”

Bank of America has received $45 billion from the government’s $700 billion Troubled Asset Relief Program, including $20 billion in January after Mr. Lewis requested it to help offset mounting losses at Merrill Lynch.

Committee Democrats said that emails show that Fed officials found it “suspect” that Mr. Lewis claimed to be surprised by the rapid growth of Merrill Lynch loses in late 2008, and were concerned that Mr. Lewis was using Merrill Lynch as a “bargaining chip” to obtain federal aide.

“In short, the Treasury Department had provided a $20 billion dowry for a shotgun wedding,” said Committee Chairman Edolphus Towns, New York Democrat. “But the question may be, who was holding the shotgun?”

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