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tv   [untitled]  CSPAN  June 13, 2009 3:30pm-4:00pm EDT

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government saying that the government ordered you to close the deal to acquire merrill. wasn't there such a letter? >> i don't recall such a letter. >> your under only but your answer is you do not recall. >> i do not isn't it true that your request of that letter was a desire to protect yourself from shareholders? >> i cannot recall that. >> chairman bernanke believe your request for such a letter was motivated by a desire to protect you from shareholder lawsuits as demonstrated in this e-mail to the general council on december 23, 2008. "he said he now fears lawsuits from shareholders for not invoking the mac, giving the deterioration at merrill lynch. he still asked whether he could use as a defense that the government ordered him to
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proceed for systemic reasons. i said no." this is from chairman bernanke. mr. lewis, is chairman bernanke's e-mail describing his call with you an accurate statement of your concerns and the bank of america's situation? >> i cannot recall the exact e- mail, but we did have concerns. there were some assurances they would support our position. >> i yield back. >> thank you very much. i yield to the ranking member. >> let's me go back to this so-called threat concern here mr. lewis. i want to be clear of the on december 17th, when you called mr. paulson, mr. bernanke, did you -- i want to know the nature of the call, did you say we were going to exercise the mac clause or thinking about exercising the mac clause? >> again, it seems like a long time ago. to the best of my recommendation
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i said we're strongly considering a mac. >> in other words, what the response you then got changed your decision? you were going to exercise the clause, you felt that was the best interest of your bank and your shareholders, you were going to do it. and then what the government told you -- based on what the government told you, you took a different course? >> no sir, it was a factser because they felt stronger but it wasn't the only factor. we also thought after a lot of consideration that there was a downside risk in not winning the mac. >> let me change directions we've been talking about this a lot. i want to get to a bill big concern i have with the unprecedented level the government has in the private sector in way too much industries in my judgment. let me provide a little context. i was on a conference call a week ago sunday with members of the auto task force talking about a gm situation, i come
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from car country, we had a gm plant closed, 800 jobs and families and community impacted. the night before i was at that announcement, we were on this conference call, members of task force talked about what was going to happen. and one member of the auto task force indicated, we're not going to run general motors, we'll only get involved if these a major event. major event was the language he used. then explained the whole deal. i asked the question, mr. sr ling, define major event. define what's major because it's going to be pretty major tomorrow in our district when 800 people find out they will not have a job. he didn't have a definition. we don't have a working definition. it would be something along the lines of a merger -- which basically told me could be any darn thing they wanted it to be. my question to you is, what day
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to day involvement does the government have in decisions you are making relative to t.a.r.p. funds, relative to any talk about -- ifny, talk about that please. >> there is a t.a.r.p. committee that looks at lending and seeing if we're using the t.a.r.p. funds to lend money. that is a report we just requested. there obviously is the involvement of regulators as they normally would be -- >> i'm talking over that. more than that. >> the only involvement that would be explicit would be after we were ordered to attain more capital as a part of this stress test, they did suggest to all banks that were raising that capital to relook he at the
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boards for financial expertise and look at the management and succession as part of the process and we have been doing that. but no day to day decisions made by regulators. >> talk to me about the t.a.r.p. dollars. t.a.r.p. funds you have, any kind of indue influence you felt there in relation to when you initially accepted t.a.r.p. dollars. >> no undue influence, no, sir. >> thank you and just a couple of follow-ups. although the threat seems to have been stated whether or not it influenced you, to your understanding under u.s. law and i realize we're not asking a banker to be a lawyer, but does the federal reserve chairman have the right to fire you or any member of your board? >> i have -- i think there's something called a cease and desift which gives them power to
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make -- to do things like that. but i've been told that -- i haven't read it myself. >> and the u.s. treasury secretary, any similar power? >> no, sir, i don't think he would have the power. >> when acting in concert, you would perceive that threat to be real that he could execute on that threat of having you or your board relieved? >> my perception was he was speaking on behalf of himself and the regulators and my perception was in concert they would have that power. >> thank you. >> i now yield to the gentleman from pennsylvania who has been working on these issues more than 20 years. >> thank you very much, mr. chairman. mr. mchenry made a comment in its introduction to you that bank of america has business relations with 98% of the fortune 500 companies. what i want to know, what are
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the ten companies that aren't doing business with them? >> i don't know but it's a very interesting question. >> get home and check that. >> mr. lewis, in some regard, we have important questions that we're trying to resolve with reforming regulatory authority in the united states, so to that extent, these hearings are helpful. but i don't hear anything thus far, either by my colleagues or yourself in responding that there was some perceived threat or abuse of action on the part of federal regulators. i'll ask you directly. do you think mr. bernanke or anyone working under the federal reserve chairman took unauthorized illegal or improper action toward you or the bank of america during these trying times? >> i do not. i would say they strongly advised and they spoke in strong terms but i thought it was with
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good intention. >> if i had to characterize in a i was thinking if the titanic were going down and some of us were in the life rafts, it sounds like an argument between the captain and some in the water and refusing to get on board and he's ordering them to get on board. is that not too dissimilar to what happened here on this mid september to december period of time when all of us admittedly had our hair on fire? >> yeah and i think they saw probably with their perspective, they saw rougher seas ahead that no one institution would be able to see. >> the one thing, because my subcommittee and financial services charged with looking at the reform of regulation, is there anything that you could see that granted in extreme circumstances such as that weekend of september 15th and the failure of lehman brothers
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and what was happening in the collapse of the financial system, was there anything we could do in reforming the regulations to provide for faster disclosure, for instance, the 8-k requirements that were not carried out precisely in this case and that disclosures by the company were not necessarily made within the four days? i know there was an argument about whether or not they were lil litt legally required to. was there something we could do to assure shareholders who do get at risk as a result of not forced but encouraged acquisitions such as this, is there anything we in the federal government can do to clarify that problem and to make it clear that would help the banking institutions in future events of this sort? >> sir, are you speaking to the lehman or merrill lynch? >> to the requirement of your filing for disclosure and notice
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to your shareholders when this was pending. you didn't necessarily precisely follow what could be considered a notice requirement. >> i think clarity is always better. if it were left up to me i would go to clarity first. >> so what you recommend we do, go into that area and declare more disclosure as to what's happening? should we put you on the net or what? >> i don't know. i'm not sure i'm following you in terms of the disclosure that you're speaking to. i'm a little shaky on your question, frankly. >> okay, do you know of any disclosure, do you have any feelings s of any disclosures, there anything that we could
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create in the form of our regulatory requirements on acquisitions or mergers? >> it would be difficult because you don't have an event many times because you're still looking at alternatives and negotiating and lehman or the merrill lynch bank of america situation, then it could be well into the morning before you get a signed deal and then you do announce it the next day for instance. so the ebb and flow of the circumstances would make it difficult to describe it as an event because it just may not happen that way. >> now, i understood in your testimony you pointed out that merrill lynch acquisition was responsible for 75% of your last quarter's profits. are you aware of shareholders complaining about that acquisition as a result of that? >> no, sir, not now. >> okay.
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thank you very much. yield back. >> thank you, very much. i now yield to the gentleman from utah. for five minutes. >> thank you, mr. lewis, i appreciate you being here. looking at some notes here dated december 31st, these are your notes also looking at some notes taken by joe brice, the cfo at bank of america were taken on december 21st of 2008 about the attempt to pull -- use the mac clause and get out of the merrill lynch transaction. in the notes it says fire board of directors if you do it, irresponsible for country. tim g agrees. is tim g. i would assume would be timothy geithner? >> those are joe price's notes?
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>> yes. >> i would have to assume with you because they are his notes. >> based on your recollection of what was going on and based on the notes we see from the cfo that was there, fire board of directors if you do it, was that your understanding? >> the -- that was is probably a reference to the conversation i mentioned that i had with secretary paulson. but, again, those are his notes. >> based on your personal recollection, is that your understanding that the board of directors would be let go if this mac clause is invoked? >> i mentioned that i need a license with whether he said could or would, but basically the premise was the management and the board would be removed if in fact we did -- >> including yourself? >> correct.
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>> so if the suggestion from the federal government was have your job removed as well as the board of directors, can it be looked at any other way other than a threat? >> well, actually, we didn't -- we didn't actually re -- have much of reaction to the comments themselves as it related to us being removed. again, what impressed us was here was the government telling a bank in good snding that they would do something like this. so it was the seriousness with which -- the seriousness of it which caused us to believe that they really did believe that there was an issue here with the mac and not calling it, that did influence us. but it wasn't the threat to have us lose our jobs. it was the seriousness -- it was because they made it, not the threat itself.
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>> i'm sorry. i didn't catch the last part. >> it was the seriousness with which they made it, n@@@@@@@ rrr >> tell me about your discussion. you recall at one. , mr. paulson is taking a bike ride on december 21. tell me specifically, what was going on in that conversation? >> well, i called him to get an update. i think that was the sunday. i am pretty sure that was the sunday that i called him. as i recall, he said, i want to give you some blunt language. i want to start out by saying that we are very supportive of the bank of america. one step further and said what i've already said that -- >> he said, but, we feel very
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strongly you should not call the mac and if in fact you do, and again, i think he said would -- but it was would or could, as i recall -- and remove the board and management. >> that certainly sounds like a threat to me and an amazing use of power there. tell me about your interactions with timothy geithner. how early in the process was he engaged in this process? >> i had no -- after the confirmation hearings or once he excused himself from the new york fed, i had no contact with mr. geithner. >> but he was involved before he was named and brought in as the treasury secretary, correct? >> he had been involved in the original t.a.r.p. money, yes. >> right.
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and tell me about mr. summers, the intersection and place of involvement that he had with the project. >> i personally had no involvement with mr. summers. mr. chairman, i would ask that mr. price's notes from december 2 1st of 2008 and mr. lewis's notes also be entered into the record. >> without objection. >> thank you. >> so ordered. >> tell me about the interaction you continued to have in -- with mr. bernanke and mr. geithner at this point? >> well, i've had very little conversation with -- in fact, i can't recall of a conversation i've had with mr. bernanke in terms of being one on one. i remember council called the federal reserve advisory council
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and we -- there were 12 of us and we have dialogue with federal reserve, including mr. bernanke in a group setting. >> any interaction with the administration -- >> gentleman from utah, your time has expired. >> my apologies. >> now yield to the gentleman from maryland, mr. cummings. >> mr. lewis, i've listened to your testimony very carefully and you know, i understand and read about you're a great man. i think one of things you have tried to do today is to walk a very thin line. you just heard republicans and democrats say to some degree that whatever was said to you about losing your job and the board being dismissed, basically
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what we've said is i don't buy it. let me -- i assume the minutes are accurate from your board meetings. these things you vote on. the minutes from board meetings -- >> yes,sir, we do -- >> i'm talking about december 22nd, 2008. >> let me read something to you. it says, you've apparently -- mr. lewis reported a series of calls. and you talk about a number of things. this is one thing i found interesting. the second point. this says -- this is what you told your boys, it says the treasury and fed stated strongly that were the corporation to invoke the material adverse change mac clause in the merger agreement with merrill lynch and fail to close the transaction, the treasury and the fed would remove the board and management of the corporation. if that isn't a threat, i don't know what is. if i say i'm going to fire you, if you don't do what i tell you
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to do, not only am i going to fire you, but i'm going to fire your board, what you said -- and i know you were caught in a difficult situation. i know that aft this merger was done your folks benefited tremendously and i know that bank of america is doing fine now. i'm here to tell you, no matter how great bank of america is doing today, the end does not -- the means does not justify the end. in other words, throughout these transactions we must have honesty and integrity and transparency, period. what i'm saying to you is -- i know you're trying to be nice but here we've got a situation where apparently mr. paulson has told you, do it. so like the nike 181818spspc8c8r
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chance. you didn't feel threatened? >> well -- >> don't get us to describe it. we're trying to figure out what you were feeling. we want to know because we want to straighten out this mess. >> i have -- i've been pretty consistent as you've just described it as it happened. >> maybe you need to be inconsistent and tell us how you felt. >> i did as i think i have said at some point in time, maybe not today, it was a strong influence on my decision but wasn't the only influence. >> i understand. so apparently -- okay.
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let me ask you this. did mr. bernanke have any influence with regard -- i understand you just answered the question. did he ever say that you should not disclose certain information and do the deal? did that ever come to you in any kind of way from bernanke? >> no sir. well, the -- he never said we should not disclose anything that was discloseable, that would be our decision and i never heard from him on the issue of us not disclosing something. >> anything else -- look like you're trying to go somewhere. >> the second piece i thought you asked me, sir, was the issue of him not wanting us to call the mac and he did express that to us. >> when did he do that? >> he expressed it on more than one occasion. i don't remember which dates but several dates. if you are an experienced man, i understand you have great judgment, apparently when you
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thought about this mac thing, it was based upon your own experiences, was it not? yes, sir. >> what were you thinking? >> i was thinking that the losses had accelerated to a point that they were out of line with other institutions and our institution. >> so you still -- if you were to go back, you would thing there was not a mac situation? >> i can't say that there wasn't a mac because we never called it so we just don't know. >> very well. >> if the gentleman would yield for a moment. >> my time is up. >> the gentleman's time is expired. i now yield to congressman flake from arizona for five minutes. >> thank you, mr. chairman. i just want to share my colleague's skepticism about
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whether or not this was a threat. it seems completely inkred you house this wouldn't be considered a threat. if this wouldn't be considered a threat, if i could ask you, what would be considered a threat? kidnap the family dog? release your college gpa scores, what is a threat if this is not a threat? >> i'm just trying to describe the circumstances and not put one word to it myself. >> this -- >> it seems from this vantage point, it seems there's sort of a kind of a stockholm syndrome here, you're still regulated by these entities and it seems you've identified with your cap tors or regulators in some ways
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here but we would like to have a candid answer here. and i don't know if you can wiggle your pinky finger or give us some sign that nobody else will see, it just -- the big grin, maybe that gives it away. let me tell you from this v vantage point it seems difficult to accept that that would not seem threatening behavior. again, from the notes, i believe mr. price, the cfo took during one of these meetings, identifies hank p, fire board if you do it, invoke the mac. responsible for the country. tim g. agrees. i mean it just seems like there's no other explanation here. and i can understand maybe from the smile and what not that you
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agree but can't say it here. but let me just say, if you learned later on that there was a 12 billion in losses that you didn't know about. it wasn't so much what they said but how they said it, the seriousness of which they explained the need for you to move forward with this merger, if not 12 billion, wheres the threshold that you would have said can't do it? can you enlighten us there a bit? >> i can't. because i dealt with the circumstances and i don't know -- what caused that to happen, to your point even if you -- whatever you want to call it, i wouldn't change how i described it. i'll let you put the word to whether it is a threat or
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whatever, but the circumstances that i described remain the same. >> how compelling was the seriousness of that conversation? would it have compelled you if the losses were twice as big as you didn't understand that they were for 24 billion instead of 12? >> at some point you couldn't have made it that deal. at some point a number that you -- the hole would have been just too big. >> if the taxpayers back fell, 24 just as easy as 12? >> no sir, because you would all of a sudden -- this is 8% after tax dividends that you're paying. at some point you couldn't bear the burden of that kind of cash flow drain. >> the 12 billion was within the range? >> it was painful and it caused us to have to push out our horizon in terms of the deal to
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work, but it is workable. >> mr. flake, i would yield to the gentleman -- >> i would like to associate myself with your comments and the gentleman from maryland where you are a little inkredhouse when it was stated before the new york attorney general, the gentlemen was threatened. we are oddly enough arguing over when you're threatened you, you feel threatened, but not whether or not there is a threat. we made that pretty clear and i appreciate your sticking to a position of not further indicting those that regulate you. it's our job to get to the truth and i think we have. yield back. >> i now yield to the gentleman from massachusetts, mr. lynch. >> thank you, i want to thank chairman ckucinich as well. thank you as well, mr. lewis,
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for coming before the committee. let me go back to a point that mr. cummings and also mr. kucinich raised earlier. mr. kucinich seemed to be hung up on the fact of when there was a significant indicator that merrill lynch was in rapid decline. rather than focus on november of '08. we can go all the way back to fall of '07 when they mounsed an almost $8 billion loss and mr. o neil was forced into retirement. there's a long history of decline here, all be it it accelerated to some degree around the time of there was significant evidence that they had overloaded with collateral debt obligatio


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