Paulson, Bernanke Leaned On Ken Lewis To Push Merrill Deal Through

Paulson, Bernanke Leaned On Ken Lewis To Push Merrill Deal Through - 2/5/2009

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HEADLINE NEWS:

Paulson, Bernanke Leaned On Ken Lewis To Push Merrill Deal Through
Staff Writer

FinancialWeek . February 5, 2009
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EXCERPT: Federal officials pushed Bank of America hard to complete its acquisition of Merrill Lynch even as credit losses mounted at the troubled investment bank, the Wall Street Journal reported on Wednesday, without citing any named sources. Bank of America arguably saved Merrill from collapse in September when it quickly struck a merger agreement the same weekend Lehman Brothers went bankrupt. By December, as Merrill’s losses were soaring, B of A Chief Executive Ken Lewis told U.S. Treasury Secretary Hank Paulson and Federal Reserve Chairman Ben Bernanke he was having second thoughts, the paper said, according to people close to Mr. Lewis. But Messrs. Paulson and Bernanke on Dec. 17 “forcefully urged Mr. Lewis not to walk away,” the paper reported. They warned Mr. Lewis that if the deal collapsed, Merrill could be doomed and that their confidence in Bank of America would be “undercut.” Days later, Mr. Bernanke told Mr. Lewis Bank of America had no grounds to walk away, the Journal reported, citing people who heard the remarks. Another Federal Reserve official warned that if Lewis did walk away and later needed more government money, regulators might consider ousting executives and directors, people close to the bank say. During the four weeks that followed, federal officials and Bank of America worked out a deal to preserve the Merrill deal. The government agreed to provide $20 billion in additional capital for the bank and to insure against losses on $118 billion in troubled assets. Officials from the bank and from the government could not be reached immediately for comment on events described by the Journal report. Bank of America previously received $25 billion as one of nine U.S. banks that kicked off the Troubled Asset Relief Program, or TARP, last fall.

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