at the federal reserve that invoking the m.a.c. would not be a good idea for the bank of america. he was uncertain about what to do but at all times it was his decision to make and he understood that i believe. >> i don't know whether you saw his testimony but he -- i mean, the man did everything he could not to -- we got him to a point where he basically said he felt threatened but he tried to say that he wasn't threatened. there was not a person in this room who did not understand that he was threatened. you even used the word several times in this hearing. you used it. i didn't. you did. >> to say i did not threaten anyone. >> no, no, no, no, no. i said you used the words that he was threatened. maybe you have been referring to paulson and so all i'm saying to you is that i can see how we got to where we've gotten to where it appears as if we've got paulson saying -- we've got lewis saying that you may have been behind the scenes doing things, we have you saying you were behind the scenes doing things. and then -- but at the sam

invoking the m.a.c. caused bank of america to have to be saved on a emergency basis by the government that clearly would not have been good for the shareholders. in the end he had to make the judgment of what to do but in my opinion it was not obvious at all that invoking the m.a.c. was a good thing for shareholders. >> you think he made that decision on his own without undue influence from the government in any way? >> i believe he did. >> thank you, mr. chairman. >> thank you very much. mr. chairman, i know we have an agreement that we would finish at 1:00. would it be possible for you to stay till 1:10? would that create a problem for you? i understand an agreement. okay? thank you. thank you very much. let me say to the members. what we will do is device ten minutes on each side and of course why don't we yield for five minutes to the chairman, ranking member on the committee. >> thank you, mr. chairman. i'll be brief. i want to go through a couple quickest. first of all, it appears as though much of

lewis' claim that he would invoking the m.a.c. in back of his deal were credible and had the bank of america decided not to complete the merger would the fed have pursued the removal of their management and board and had the fed ever taken action to remove the management of a private entity before? do your best and -- >> i was concerned initially about whether this was a serious proposal to invoking the m.a.c. because i did believe it would be very detrimental to b of a as well as for the financial system. i never made any threats to mr. lewis regarding removing the board and the management. one example of where the federal rer reserve removed management was a.i. g where there was an agreement the c.e.o. would be replaced upon the consummation of the loan we made to stabilize that company. >>. >> the gentlemanwoman's time has expired. >> thank you, mr. chairman. >> congressman mchenry from north carolina. >> thank you. chairman bernanke, thank you for your testimony. i know this is certainly not easy to recall what happened in tho

lewis ong december 14, 2008, and then he announced his desire or his intention to invoking the m.a.c. then we have a difference of opinion and that is that on the one side some folks are saying that you or mr. paulson threatened mr. lewis, other people say it was simply iron-physicianed encouragement to have him stay in the deal. in any event he did that, he stayed in the deal. there is an interesting e-mail from you and i'm interested in the taxpayers' position. this is from you, mr. chairman, to scott alvarez. had a good conversation with lewis just now, he confirms his willingness to drop the m.a.c., opposition to the deal going forward. and to work with the government to develop whatever support package might be needed for earnings announcements dates around january 20. we discussed his common equity issue, we agreed that having a significant amount of t.a.r.p. capital in the form of common equity was not an ideal solution given the ownership implications. but we agreed both to think about possible solutions, a government-backed capital raise or government common with limited cont

might want to avoid it finalizing the deal due to the revelation of m.a.c. ac. however, it is difficult to understand how this came as a complete surprise given reports by "the new york times" that shortly after the deal was announced in september, b of a a had quickly unstalled 200 people at merrill lynch to thoroughly review their books. were any of the 200 bank of america employees responsible for analyzing merrill lynch aware of the potential for the $12 billion loss before you legendly discovered it in mid december? >> -- we did have people there and we did know that there were losses and that was clear both in our company and theirs. we can see that that was happening and there were rumors on the street that that was happening across all finance institutions and we saw evidence of that after the fourth quarter close because we saw most everybody had losses. the thing that caused us to be concerned was the acceleration that we saw when we got the numbers that we did on the 14th. >> did you feel that the reviews of merrill lynch's books were thoroughly a