NEW YORK — Federal Reserve Chairman Ben Bernanke and former Treasury Secretary Henry M. Paulson Jr. threatened to remove the management and board of Bank of America unless it acquired ailing investment house Merrill Lynch late last year, according documents released Thursday by New York State Attorney General Andrew Cuomo.
BofA chief executive Ken Lewis told investigators he wanted to back out of the merger because “devastating losses” at Merrill would have been a detriment to his own company, the documents show. But the threat from Paulson changed his mind, Lewis told the attorney general’s office.
Paulson told New York investigators that he made the threat to remove the leaders of BofA at the request of Bernanke, the documents state. The two men were gravely concerned about the danger to the wider financial system.
Lewis did not immediately inform shareholders about the losses at Merrill Lynch or the pressure from the federal government.
Weeks after the transaction closed Jan. 1 of this year, Bank of America reported $15 billion loss and received $20 billion in government bailout funds on top of the $25 billion it had already received.
