WASHINGTON — House lawmakers on Thursday accused federal regulators of a gross misuse of power in orchestrating a “shotgun wedding” between Bank of America and Merrill Lynch that cost U.S. taxpayers $20 billion.
They also took aim at BofA chief executive Kenneth Lewis, questioning whether he played dumb last fall as Merrill’s financial losses mounted and threatened not to go through with the merger to squeeze money from the government.
“Why did a private business deal announced in September and approved by shareholders in December — with no mention of government assistance — end up costing taxpayers $20 billion in January?” asked Rep. Edolphus Towns, D-N.Y., chairman of the House Oversight and Government Reform Committee.
The panel has been investigating the deal, including whether federal officials pressured Lewis and urged him to keep quiet about Merrill Lynch’s financial problems. Not divulging that information would have violated Lewis’ fiduciary duty to the bank’s shareholders.
In testimony before the committee, Lewis said publicly for the first time that his job was threatened after he expressed second thoughts about the merger. Lewis said then-Treasury Secretary Henry Paulson and federal regulators made clear that if the bank reneged on its promise, they would force his ouster.
Towns said he plans to invite Federal Reserve Chairman Ben Bernanke and Paulson to testify at a later hearing.
