The defeats are a jolt to a full-strength Pakistan side in their preparations for the Twenty20 World Cup
A senior Republican Senator joined House Democrats on Friday in seeking more details after New York’s attorney general said CEO Kenneth Lewis had testified he was pressured by former Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke to do the merger, or lose his job.
“That was very disturbing,” Richard Shelby, the ranking Republican on the Senate Banking Committee, told the Reuters Global Financial Regulation Summit in Washington on Friday.
“I don’t know if there is securities fraud in there or what,” said Shelby, from Alabama.
Meanwhile, lawmakers in the House of Representatives expanded their probe by demanding all internal communications from the Federal Reserve and the U.S. Treasury Department touching on the deal.
New York Attorney General Andrew Cuomo said on Thursday that Lewis testified that Paulson and Bernanke also pressured him to keep quiet about losses at the troubled Merrill Lynch, which rose to $12 billion from $9 billion in a matter of days.
This account has been disputed by representatives for Bernanke and Paulson but raises questions about whether federal officials encouraged Lewis to keep important information from investors.
Bank of America ultimately got additional federal bailout money to absorb Merrill.
Shelby said he wants the Senate Banking Committee to hold a hearing on the merger.
A spokeswoman for Senate Banking Committee Chairman Christopher Dodd said he was deeply concerned about the allegations and had talked on Friday with Cuomo. “He will decide on next steps soon,” she said.
Representative Ed Towns, chairman of the House Oversight and Government Reform Committee, and domestic policy subcommittee chairman Dennis Kucinich, sent letters dated April 23 to the Fed and Treasury demanding the internal documents, with a request for responses by May 4.
“The implications of Mr. Lewis’ testimony, if accurate, are extremely serious,” said Towns and Kucinich.
The Securities and Exchange Commission has already said it is reviewing the disclosures surrounding the merger.
Publicly-traded companies are supposed to widely publicize so-called material information—information an investor needs to decide whether to buy or sell a stock.
“Bank of America and Ken Lewis are, in my mind, in deep trouble,” said James Cox, a securities professor at Duke Law School. “Both under state law and federal law disclosure standards there was clear duty to correct earlier statements regarding the viability and wisdom of the acquisition of Merrill Lynch.”
The potential liability of Paulson and Bernanke is a more murky area, according to former SEC chairman Harvey Pitt, who served under former President George W. Bush.
Securities law absolves government officials from liability in acts performed as part of official duties, he said.
“If Paulson and Bernanke coerced B of A to violate the securities laws out of concern for the economy, they can’t be liable and I think it would be hard to hold B of A liable,” Pitt said in an email.
“Nevertheless, you can’t violate the duties you owe shareholders merely because someone in the government asks you to do so,” said Pitt.
The defeats are a jolt to a full-strength Pakistan side in their preparations for the Twenty20 World Cup
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