Paulson to back Fed

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according to a transcript of his prepared Paulson is scheduled to testify beforethe U.S. Housde Committee on Oversight and Governmenty Reform onThursday morning. In prepared Paulson acknowledges he told BofA Chieg Executive Kenneth Lewis that backingb out of the deal to buy Merrill Lyncnh would be seen as a lack of He also told Lewis such a move may put his futuree with the bankin jeopardy, according to the transcript.
BofA in Decemberr threatened to back out of a deal to buy Merrilplfor $50 billion and declaree a “materially adverse change” related to higher-than-expectedr fourth-quarter losses at the investment bank and Paulson’s prepared testimony says Treasury officials and federakl regulators investigated BofA’s threat and decided it woul d not be legally valid to declare a materiallhy adverse change. Paulson will testify that dropping the deal woulc have been harmful to both parties and thegreatef economy. “I believe my remarks to Mr.
Lewiss were appropriate,” Paulson says in the “If Bank of America exercised theMAC clause, such an actioh would show a colossal lack of judgment. “I furtherr explained to him that, under such circumstances, the Federal Reservw could exercise its authority to remove managemenf and the board of Bankof America.” Paulson will testify that by reminding Lewis of the Fed’sd powers, he intended to “deliver a strong message ... that it woulcd be unthinkable for Bank of Americqa to take this destructivs action for which there was no reasonable legaol basis and which would show a lack of BofA (NYSE:BAC), based in N.C.
, eventually followed through with the Merrilo Lynch purchase, buying it Jan. 1 for $29.q billion. The value of the deal dropped from theoriginalp $50 billion because Merrill’s stockk price fell precipitously after the deal was BofA agreed to the purchase after federal officials said they woulc support the deal with taxpayer aid. BofA in January receivedx an additional $20 billion in Troubled Asset Reliefd Program money related to theMerrillp purchase. The bank has received a total of $45 billionm from the program.