Fallout: The Financial Crisis

Lewis kept quiet about Merrill deal

Ashley Milne-Tyte Apr 23, 2009
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Fallout: The Financial Crisis

Lewis kept quiet about Merrill deal

Ashley Milne-Tyte Apr 23, 2009
HTML EMBED:
COPY

TEXT OF STORY

Steve Chiotakis: The New York Attorney General’s office is set to release today its testimony from Bank of America chief Ken Lewis. The transcript will go to federal regulators and officials in charge of bailout money. The Wall Street Journal reports this morning that testimony indicates Lewis was told to stay quiet about losses facing Merrill Lynch before B of A acquired it. The latest from New York, and Ashley Milne-Tyte.


Ashley Milne-Tyte: Normally, a company is obliged to let shareholders know a prospective acquisition is in financial trouble. Armed with that knowledge, shareholders can vote to scrap a deal.

But Ken Lewis apparently felt Fed Chairman Ben Bernanke and former Treasury Secretary Henry Paulson wanted him to keep quiet about Merrill Lynch’s financial problems.

Duke University law professor Jim Cox says it doesn’t matter what the government wanted — as CEO, Lewis’ first obligation was to his shareholders. Many of them were furious when they found out the extent of Merrill Lynch’s losses at the end of last year.

Jim Cox: I think that the shareholders will rightly be concerned, would like to have his scalp quite frankly. And I think there’s a very good chance that not only will suites be brought, but I think these suites have tremendous legs to themselves, and are likely to be successful under both state law and federal law.

Cox says it’s not certain Lewis could be removed for staying mum, but he says the calls for his resignation will probably get louder.

In New York, I’m Ashley Milne-Tyte for Marketplace.

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