The Washington Independent
The Washington Independent

‘A Most Unusual Transaction’

Federal Reserve Chairman Ben Bernanke is testifying this morning before the House Oversight and Government Reform Committee about his role in catalyzing Bank of

Iram Martins
News
Last updated: Jul 31, 2020 | Jun 25, 2009

Federal Reserve Chairman Ben Bernanke is testifying this morning before the House Oversight and Government Reform Committee about his role in catalyzing Bank of America’s controversial December buyout of Merrill Lynch.

The saga made headlines this spring when former BoA CEO Ken Lewis told New York’s attorney general that he was reluctant to go through with the deal because Merrill was in such tough shape financially, but federal officials, including Bernanke, had pressured him to keep quiet about Merrill’s troubles so the deal could proceed.

Today Bernanke conceded that (1) Lewis had expressed interest in backing out of the acquisition, and (2) he urged Lewis to complete the contract, citing the fragility of the economy at the time. But in his strongest defense yet of the Fed’s handling of that deal, Bernanke also said the Fed put no inappropriate pressure on BoA to finalize the deal.

Here’s the money quote from his prepared testimony:

Importantly, the decision to go forward with the merger rightly remained in the hands of Bank of America’s board and management, and they were obligated to make the choice they believed was in the best interest of their shareholders and company. I did not tell Bank of America’s management that the Federal Reserve would take action against the board or management if they decided [not] to proceed with the [acquisition]. Moreover, I did not instruct anyone to indicate to Bank of America that the Federal Reserve would take any particular action under those circumstances.

Rep. Edolphus Towns (D-N.Y.), who chairs the oversight panel, had subpoened the Fed earlier in the month to obtain documents related to the BoA-Merrill deal. His opening statement at today’s hearing set the appropriate tone.

“This was,” Towns said, “a most unusual transaction.”

Iram Martins | Personal trainer. Aspiring sommelier. Brunch critic who works part-time. When I'm not competing, you'll find me at dog beaches with my black lab or sipping drinks at the best bars in town. I like to fly a lot.

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