Bank of America's CEO testifies about the Merrill Lynch deal
But his stock prices shoots higher because analysts are starting to think the company may thrive again.
Bank of America's Ken Lewis was on Capitol Hill again, but today the House Committee on Oversight and Government Reform wanted to know whether the Federal Reserve and other government officials pressured Lewis to move forward with B of A's deal to buy Merrill Lynch.
The answer, Lewis said, was "yes." But, he said, without the government pressure, the bank still might have completed the deal.
"It’s hard for me to project what I ultimately would have done," Lewis said when asked if he would have walked away from the Merrill Lynch purchase. "But, yes, we were strongly considering it."
- Learn how to invest with our New Investor Center
"Treasury and Federal Reserve representatives asked us to delay any such action, and expressed significant concerns about the systemic consequences and risk to Bank of America of pursuing such a course," Lewis said in prepared testimony.
"Both the government and Bank America were aware that the global financial system was in fragile condition, and that a collapse of Merrill Lynch could hasten a crisis."
There were also e-mails from Fed officials that harshly criticized Bank of America and Lewis after the bank tried to back out of the deal upon learning of Merrill's huge fourth-quarter losses, according to published reports.
Bank of America had offered to buy Merrill for $50 billion in mid-September, at the height of the financial market meltdown.
The value of the deal sank to $19 billion as Bank of America's stock declined in subsequent weeks.
"Even six months later, it is easy to forget just how close to the brink our system came," Lewis said in his prepared remarks.
An e-mail from Federal Reserve Bank of Richmond President Jeffrey Lacker dated Dec. 21, less than two weeks before the deal was official, said Fed chairman Ben Bernanke "intends to make it even more clear that if they play that card and they need assistance, management is gone," referring to B of A's threats to walk away from the merger.
The House panel subpoenaed the Fed earlier this week for documents related to the deal.
As hearings go, its success or failure depended on your point of view. The Republicans were using the hearing to suggest Federal Reserve and the Treasury had gone barmy. The Democrats were using it to suggest that Lewis should have told his shareholders earlier about the problems of the Merrill Lynch deal.
And Lewis? Well, he looked like he just wanted to go back to his office in Charlotte.
For all the hoorah about Bank of America, the stock did perform splendidly today, finishing tops among Dow stocks and third among S&P 500 stocks.
The reason: Analysts are starting to like the stocks. Keefe, Bruyette & Woods, Raymond James and Morgan Stanley raised their ratings and price targets on the stock.
Morgan Stanley even predicted the company would earn $2 a share in 2010. Most analysts are at around $1 a share.
Keefe, Bruyette and Woods upgraded B of A stock to "outperform" and added a price target of $16.50 from $12.
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
[BRIEFING.COM] The major averages posted solid gains ahead of tomorrow's policy directive from the Federal Open Market Committee. The S&P 500 rallied 0.8%, while the Russell 2000 (+0.3%) could not keep pace with the benchmark index.
Equity indices hovered near their flat lines during the first two hours of action, but surged in reaction to reports from the Wall Street Journal concerning tomorrow's FOMC statement. Specifically, Fed watcher Jon Hilsenrath indicated that the statement ... More
More Market News
|There’s a problem getting this information right now. Please try again later.|
VIDEO ON MSN MONEY
MUST-SEE ON MSN
- Video: Easy DIY smoked meats at home
A charcuterie master shares his process for cold-smoking meat at home.
- Jetpacks about to go mainstream
- Weird things covered by home insurance
- Bing: 70 percent of adults report 'digital eye strain'