WASHINGTON — House lawmakers on Thursday accused federal regulators of a gross misuse of power in orchestrating a "shotgun wedding" between Bank of America Corp. and Merrill Lynch & Co. that cost U.S. taxpayers $20 billion.
They also took aim at Bank of America chief executive Kenneth Lewis, questioning whether he played dumb as Merrill's financial losses mounted and threatened not to go through with the merger to squeeze money from the government. Lewis says he did nothing wrong.
The panel has been investigating the deal, including whether federal officials pressured Lewis and urged him to keep quiet about Merrill Lynch's financial problems.
In testimony before the House Oversight and Government Reform Committee, Lewis said publicly for the first time that his job was threatened after he expressed second thoughts about the merger. Lewis said then-Treasury Secretary Hank Paulson and federal regulators made clear that if the bank reneged on its promise, they would force his ouster and that of board members at the bank.
"What gave me concern is that they gave that threat to a bank in good standing," Lewis told the House Oversight and Government Reform Committee.
Paulson and Federal Reserve Chairman Ben Bernanke also pledged government aid to Bank of America to help absorb the losses, Lewis said.
The Federal Reserve declined to comment on Lewis' testimony.
Lawmakers on the committee said they were troubled by Lewis' testimony as well as internal Fed documents related to the deal.
In one e-mail, Bernanke said he thought Lewis' threat to pull out of the deal was a "bargaining chip" and "we do not see it as a very likely scenario at all."
Other e-mails by federal analysts suggested they thought it suspect that Lewis claimed to be surprised by Merrill's losses given the clear signs of a deteriorating economy.
Rep. Dennis Kucinich, D-Ohio, said he thought Lewis was the one who was pressuring the government.
"There's been a misconception here that the government put a gun to the head of Bank of America, when it's quite possible that it was the Bank of America that put a gun to the head of the Fed by threatening" to back out, Kucinich said.