Fed Gets Subpoena From House Panel on Bank of America
By Scott Lanman
June 9 (Bloomberg) — The Federal Reserve was subpoenaed by the House Oversight Committee for e-mails and documents related to Bank of America Corp.’s purchase of Merrill Lynch & Co. after the panel was unable to obtain them through a request last week.
The central bank will comply and seeks confidentiality for the information, a Fed official said today on condition of anonymity. The panel said it wants to secure the Fed documents for a hearing scheduled for June 11, and Bank of America Chief Executive Officer Kenneth Lewis has agreed to testify.
The move is part of increased congressional scrutiny of the central bank, which helped craft a government aid package enabling Bank of America to absorb Merrill Lynch in January. Lewis told New York state investigators in February that he was pressured in December by Bernanke and former Treasury Secretary Henry Paulson to complete the Merrill acquisition amid mounting losses at the brokerage firm.
“It does sound like the parties aren’t getting along,” said Oliver Ireland, a former Fed counsel who is now a partner at Morrison & Foerster in Washington. It’s “unusual” for Congress to subpoena information on bank supervision from the Fed, he said.
The committee served the subpoena today, Jenny Rosenberg, a spokeswoman for the panel, said in a telephone interview. The central bank received the subpoena, the Fed official said.
Committee Chairman Edolphus Towns, a New York Democrat, and Ohio Representative Dennis Kucinich, chairman of the domestic policy subcommittee, sent Bernanke a letter this month requesting 43 items, including e-mails from Bernanke and other officials, meeting notes and the Fed’s analysis of the companies’ merger.
Withheld Documents
The Fed “refused” to provide the documents, resulting in the subpoena, California Representative Darrell Issa, the panel’s senior Republican, said in an e-mailed statement today.
In an April letter to Kucinich, Bernanke said the Fed “acted with the highest integrity” during its discussions with Bank of America on Merrill Lynch and didn’t seek to withhold any information from the public on Merrill Lynch’s losses.
Bernanke said in the letter that information collected by the Fed up to that point consisted of “confidential supervisory information or confidential business information, both of which have traditionally been regarded as material that should not be made public, especially in the case of institutions that continue to operate.”
Ranking Republican
Towns and Issa agreed to the subpoena today, the panel said.
“The marriage between Bank of America and Merrill Lynch was a shotgun wedding pushed by the Federal Reserve,” Issa said in his statement.
Bank of America acquired the brokerage on Jan. 1.
Bernanke said in February that Bank of America had sufficient time to study its acquisition of Merrill Lynch from September until mid-December, when Lewis asked about canceling the transaction. “We didn’t see any realistic legal way to break the deal,” Bernanke said at the time.
Bank of America has sold $45 billion in preferred shares to the U.S., more than any other bank except Citigroup Inc. The bank agreed to a loss-sharing plan with federal regulators in January on $118 billion in assets, mostly involving securities held by Merrill Lynch. Bank of America in May said it is negotiating to end that agreement because improving credit market conditions make the protection unnecessary.