Bank of America CEO: It was all Bernanke and Paulson’s Fault

April 23, 2009

(ChattahBox)—The Wall Street Journal is reporting today that Bank of America Corp’s CEO, Kenneth Lewis said under oath that Federal Reserve Chairman Ben Bernanke and former Treasury Secretary Henry Paulson, exerted pressure on him to not reveal Merrill Lynch’s huge fourth quarter losses, right before the impending merger between the two financial giants.

Lewis made these claims during a February deposition, ordered by New York Attorney General Andrew Cuomo, astonishingly saying “it wasn’t up to me” to report Merrill Lynch’s losses, apparently exempting himself from any fiduciary duty to his shareholders.

The merger between the two financial companies was finalized on January 1, with the shareholders approving the merger in December, uninformed about Merrill Lynch’s dismal financial situation. Bank of America later reported that the sinking ship that was Merrill Lynch, lost $15.84 billion in the fourth quarter.

Lewis went on to say in his testimony that Bernanke and Paulson basically pleaded with him not to disclose Merrill’s losses, because if the merger didn’t go through as planned it would have a huge impact on the American financial system. Paulson’s spokesperson is quoted as saying that he told Lewis “the U.S. government was committed to ensuring that no systemically important financial institution would fail.”

The Journal is reporting that an unnamed government source familiar with Bernanke’s conversations with Lewis, said Bernanke advised Lewis to seek out his own legal counsel regarding disclosure of Merrill’s precarious financial position.

Bank of America’s April 30 shareholders’ meeting is not expected to be a pleasant one for Lewis. In addition to these latest revelations regarding the lack of disclosure in the Merrill deal, Bank of America shares have plummeted in value, losing three-fourths of their value. The merger with Merrill put Bank of America on life support, requiring a huge federal bailout.

Bank of America shareholders are expected to call for Lewis’ ouster from its board and his position as CEO.

Cuomo’s office plans to release Lewis’ testimony on Monday, just days before the shareholder’s meeting when Lewis is expected to have to fight for his professional life.

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