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IN RE: EXEC. COMPENSATION INVESTIGATION BANK OF AMERICA -MERRILL LYNCH DEPOSITION OF KEN L. LEWIS

IN RE: EXEC. COMPENSATION INVESTIGATION BANK OF AMERICA -MERRILL LYNCH DEPOSITION OF KEN L. LEWIS


EXCERPTS:

Q. At the point in time of this board
meeting, though, you were relating to the board
that you felt you had a commitment from the Fed and
the Treasury to make good on whatever harm is
caused by the increased losses at Merrill Lynch; is
that right?

A. I had verbal commitments from Ben
Bernanke and Hank Paulson that they were going to
see this through, to fill that hole, and have the
market perceive this as a good deal.

MR. CORNGOLD: Isn’t the only way to
fill that hole, though, to give you money,
not to give you money that you would have to
pay back at some interest rate with some
potential equity interest, too?

THE WITNESS: No. I think you have to
separate the fact that, yes, there is still
some short-term paying -it’s more
short-term paying now than we would have had
had all this not happened, but longer term we
still see a strategic benefit. So we saw it
as a short term versus a long term impact on
the company.

MR. CORNGOLD; When you entered into the
initial contract with Merrill Lynch did you
get a fairness opinion about the transaction?

THE WITNESS: Yes.

MR. CORNGOLD: From whom?

THE WITNESS; Chris Flowers something.

MR. CORNGOLD: And did you get a
fairness opinion from anyone about the
transaction that you entered into with the federal government and the Fed?

THE WITNESS: No. MR. CORNGOLD: Did you consider whether you had a legal obligation to do that? THE WITNESS: I would rely on the advice of the general counsel for that.

MR. CORNGOLD: But when you say that, does that mean that you asked and got advice, or that you didn’t ask but relied
THE WITNESS: I would rely on somebody bringing that question forth, and nobody did.

Q. Did you ask anyone to look into whether the oral, verbal commitments from the Fed and Treasury were enforceable?

A. No. I was going on the word of two very respected individuals high up in the American government.

Q. Wasn’t Mr. Paulson, by his instruction, really asking Bank of America shareholders to take a good part of the hit of the Merrill losses?

A. What he was doing was trying to stem a financial disaster in the financial markets, from his perspective.

Q. From your perspective, wasn’t that one
of the effects of what he was doing?

A. Over the short term, yes, but we still
thought we had an entity that filled two big
strategic holes for us and over long term would
still be an interest to the shareholders.

Q. What do you mean by “short term”?

A. Two to three years.

Q. So isn’t that something that any
shareholder at Bank of America who had less
than a three-year time horizon would want
to know?

A. The situation was that everyone felt
like the deal needed to be completed and to be able
to say that, or that they would impose a big risk
to the financial system if it would not.

MR. LAWSKY: When you say “everyone,”
what do you mean?

THE WITNESS: The people that I was
talking to, Bernanke and Paulson.

MR. LAWSKY: Had it been up to you would
you made the disclosure?

THE WITNESS: It wasn’t up to me.

MR. LAWSKY: Had it been up to you.

THE WITNESS: It wasn’t.

MR. CORNGOLD: Why do you say it wasn’t
up to you? Were you instructed not to tell
your shareholders what the transaction was
going to be?

THE WITNESS: I was instructed that “We
do not want a public disclosure.”

MR. CORNGOLD: Who said that to you?

THE WITNESS: Paulson.

MR. CORNGOLD: When did he say that to
you?

THE WITNESS; Sometime after I asked Ben
Bernanke for something in writing.

Q. When did that occur?

A. Which one?

Q. When did Mr. Paulson state that he did
not want a public disclosure?

A. It was sometime late in the year. I
think it’s actually in the minutes.

MR. LIMAN: If you have the next set of
minutes it might help the witness.

Q. What’s your best recollection of what

Mr. Paulson said to you on that point?

A. That was the conversation that I
mentioned that I went to Bernanke to ask the
question, and he didn’t call me back but Hank did.
The request was for a letter stating what they
would do, and he had those two elements in there.
But the thing that we’re talking about is that he
said “We do not want a public disclosure.”

Q. A public disclosure of what?

A. Of what they were going to be doing for us until it was completed.

[…]

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