June 25, 2009 in News
By Mark Felsenthal and Kim Dixon
June 25, 2009
WASHINGTON – Federal Reserve Chairman Ben Bernanke, facing his toughest grilling yet by U.S. lawmakers, said on Thursday he had never threatened to fire Bank of America’s management if they pulled the plug on a planned merger with Merrill Lynch.
During a tense three-hour hearing, lawmakers repeatedly pressed Bernanke on whether he had coerced Bank of America chief Kenneth Lewis in December to go forward with the deal despite Merrill’s quickly deteriorating finances.
Bernanke, holding his ground, told the members of the House of Representatives Oversight and Government Reform Committee the Fed never did anything “beyond the law or unethical.”
“I did not tell Bank of America’s management that the Federal Reserve would take action against the board or management,” he said.
Bernanke also said neither he nor other Fed officials had “ever directed, instructed, or advised” the bank to withhold information about Merrill’s mounting losses from the public, another charge lawmakers have leveled at the central bank.
The Fed has faced intense scrutiny from both Democrats and Republicans on Capitol Hill for many of the extraordinary actions it has taken since the financial crisis erupted in the summer of 2007.
After Bank of America’s eventual decision to go through with its purchase of Merrill, the bank received a fresh injection of $20 billion in public funds and a government backstop on potential losses on a $118 billion pool of shaky assets.
“It is still unclear whether Bank of America was forced by the federal government to go through with the Merrill deal or whether Ken Lewis pulled off what may have been the greatest financial shakedown in a long, long time,” the committee’s chairman, Representative Edolphus Towns, said.
Representative Darrell Issa, the panel’s top Republican, charged on Wednesday that the Fed had covered up its involvement in the merger and “deliberately hid” important details from other federal regulators.
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