Bernanke faces GOP-led heat on Bank of America-Merrill deal

WASHINGTON — Facing an unusual political trial, Federal Reserve Chairman Ben Bernanke disputed accusations Thursday he pressured Bank of America to acquire Merrill Lynch in a deal that cost taxpayers $20 billion.

In a three-hour hearing of the House Oversight and Government Reform Committee, Bernanke denied threatening to oust Bank of America's CEO Kenneth Lewis or the bank's board members if they abandoned the takeover after discovering spiraling losses at Merrill.

"I never said that I would replace the board and management" if Lewis decided to invoke a clause in the acquisition contract to try to stop the deal, Bernanke told the committee.

It was Bernanke's first public response since the committee launched an investigation into whether he or other government officials bullied Bank of America to stick with its plan to combine the two financial powers.

Throughout the day, Bernanke faced often hostile questioning — unusual for a Fed chairman, who typically commands deference in public settings.

Of Bernanke's denial that he threatened Lewis' job, Rep. Jason Chaffetz, R-Utah, said: "With all due respect, I'm just not buying that."

Neither was Rep. Dan Burton, R-Ind., who huffed: "This is not a socialist society."

Adopting the role of outsider, Republicans in particular have turned aggressive toward Bernanke, trying to link him to the Obama administration as advocates of government meddling in private industry. Many Republicans are suspicious of the administration's plan to expand the Fed's regulatory powers.

It's an odd shift, because Bernanke is a Republican appointee, and many of his key advocates are Democrats. And it comes at a pivotal time: Bernanke's term expires early next year, and President Barack Obama will have to decide whether to pick his own Fed chief or reappoint Bernanke.

The Fed chief said it would have been a bad idea for Bank of America to invoke the deal's escape clause, because it would have led to extended and costly litigation with Merrill Lynch. That would have "greatly reduced or destroyed" the value of the investment bank, he said.

"I expressed those concerns, which is appropriate, but it was always (Lewis') decision whether or not to go ahead and take that decision," Bernanke said.

Share This Story