Ken Lewis, when asked by NY’s attorney general Andrew Cuomo why he didn’t disclose many important details about Bank of America’s faildeal to buy Merrill to shareholders until the damage had been done, places the blame firmly on Bernanke and Paulson:
Federal Reserve Chairman Ben Bernanke and then-Treasury Department chief Henry Paulson pressured Bank of America Corp. to not discuss its increasingly troubled plan to buy Merrill Lynch & Co. — a deal that later triggered a government bailout of BofA — according to testimony by Kenneth Lewis, the bank’s chief executive.
Mr. Lewis, testifying under oath before New York’s attorney general in February, told prosecutors that he believed Messrs. Paulson and Bernanke were instructing him to keep silent about deepening financial difficulties at Merrill, the struggling brokerage giant. As part of his testimony, a transcript of which was reviewed by The Wall Street 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.
Screw your duty to the shareholders! Your duty is to the state, which doesn’t believe we need any transparency in this-here system. Shareholders approved the deal without the info regarding the fail, and not only would they probably not have done so given the details, it would’ve have been an OMG EVEYBODY PANIC moment. The omerta surrounding this deal was long-rumored, and now Ken Lewis wants us to believe that is the truth:
“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.
Lewis also claims Paulson threatened to remove him and the entire board if they balked on the deal; the Fed has declined to give Cuomo all the information he’s looking for, citing regulatory privilege. When Bernanke (and Paulson) play the STFU or GTFO card, they play it but good.
It’s worth noting that Ken Lewis has tried to throw everyone under the bus but Ken Lewis for this deal, though. Prior to this, he blamed John Thain effusively.
ETA – and here is Cuomo’s official letter on the subject, including information on Benny’s citation of privilege. Hat tip to Zero Hedge: