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House Panel Sends Second Subpoena To Fed On Bank of America-Merrill Deal

The House Oversight committee has issued a second subpoena to the Federal Reserve demanding additional internal information regarding the agency's role in the Bank of America-Merrill Lynch merger last year, according to a source familiar with the panel's ongoing investigation.

Specifically, the committee is seeking closed-door discussions at the Fed over the deal.

Bank of America chief executive Ken Lewis has testified twice under oath -- including last week before the Oversight committee -- that Fed Chairman Ben Bernanke threatened to remove Lewis and the entire B of A board if the bank pulled out of its $50 billion merger with the troubled Merrill.

The Oversight committee's first subpoena turned up e-mails from Bank of America and the Fed suggesting some serious arm-twisting.

But the committee is trying to determine if Bernanke, the Fed or the Treasury broke any laws while strong-arming Lewis. The investigation is being led by the panel's Republicans.

Between the time the deal was announced in September and consummated at the end of the year, Lewis grew increasingly uncomfortable with the tie-up, as Merrill's losses ballooned into the billions in December.

Lewis considered attempting to pull out of the deal, but said he was told by Bernanke and former Treasury Secretary Hank Paulson that if the deal collapsed, the precariously balanced U.S. financial system might do the same. Bernanke backed up the urging with the threat to remove Lewis and the board, which Bernanke is expected to deny when he testifies on the Hill next Thursday. He previously has said he did not overstep his authority while dealing with Lewis on the deal.

Lewis testified before the House Oversight committee last week on the deal, but the committee evidently didn't hear enough. Hence today's second subpoena, which seeks to get more from Bernanke's files and seek to determine what role if any then-New York Fed president Tim Geithner had in the deal.

Only Paulson has not been heard from on this deal; the committee may ask him to testify in July.

-- Frank Ahrens
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By Frank Ahrens  |  June 19, 2009; 3:31 PM ET
Categories:  The Ticker  | Tags: Bank of America, Ben Bernanke, Hank Paulson, Ken Lewis, Merrill Lynch  
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Comments

This should have gotten top billing.
I hope they make it so.

Posted by: dottydo | June 19, 2009 6:25 PM | Report abuse

Justice may get around to punishing any wrongdoers but it will not be able to undo the damage done to the economy and the standing of its institutions.

Posted by: psouleles | June 22, 2009 4:08 AM | Report abuse

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