"Bank of America CEO Ken Lewis was tempted to reconsider the deal to acquire Merrill, Cuomo said, following his discovery on December 14th of a "staggering amount of deterioration" at the former financial giant. Lewis sought legal advice regarding whether or not Bank of America could get out of the merger upon learning of the significant deterioration.
On December 17th, according to the letter, Lewis told then-Treasury Secretary Henry M. Paulson Jr. that he was seriously considering rejecting the merger under the clause allowing him to get out of the situation.
Over the next four days Lewis was reportedly pressured by federal officials to go through with the merger. However, on December 21st he told Paulson that he still wanted to get out of the proposed merger.
In response, Paulson reportedly threatened to remove Bank of America's management and board if the clause preventing the merger were to be invoked. Cuomo described the scenario in his letter.
"According to Secretary Paulson, after he stated that the management and the Board could be removed, Lewis replied, 'that makes it simple. Let's deescalate.'" the letter states. "Lewis admits that Secretary Paulson's threat changed his mind about ...terminating the deal."
To further complicate matters, Cuomo said Paulson has told him he made the threat at the request of Chairman Bernanke.
"Secretary Paulson has informed us that he made the threat at the request of Chairman Bernanke," Cuomo wrote. "After the threat, the conversation between Secretary Paulson and Lewis turned to receiving additional government assistance in light of the staggering Merrill Lynch losses."
My comment: Of course it is worth speculating what other threats and tactics have been used behind closed doors.
