>> i yield back. >> i yield the gentleman from utah. >> thank you, mr. lewis. i appreciate you being here. looking at some notes here, dated december 31, and these are your notes, also looking at some notes taken by joe price, the cfo at bank of america, that were taken on december 21, two dozen 8, about the attempt to use the mac costs. in those notes id says fire board of directors -- directors, is responsible for country. timg would agree. >> this are mr. price's notes?

>> yes sir. >> i would have to assume with you because they are his notes. >> based on your recollection of what was going on and based on the notes we see from the cfo that was there, fire board of directors if you do it, was that your understanding? >> the -- that was is probably a reference to the conversation i mentioned that i had with secretary paulson. but, again, those are his notes. >> based on your personal recollection, is that your understanding that the board of directors would be let go if directors would be let go if this mac claus invoked? >> i mentioned that i need a license with whether he said could or would, but basically the premise was the management and the board would be removed if in fact we did -- >> including yourself?

>> correct. >> so if the suggestion from the federal government was have your job removed as well as the board of directors, can it be looked at any other way other than a threat? >> well, actually, we didn't -- we didn't actually re -- have much of reaction to the comments themselves as it related to us being removed. again, what impressed us was here was the government telling a bank in good standing that they would do something like this. so it was the seriousness with which -- the seriousness of it which caused us to believe that they really did believe that there was an issue here with the mac and not calling it, that did influence us. but it wasn't the threat to have us lose our jobs. it was the seriousness -- it was because they made it, not the

threat itself. >> i'm sorry. i didn't catch the last part. >> it was the seriousness with which they made it, not the threat itself. >> tell me about your discussion. you call at one points as i'm looking at the time line here and mr. paulson is taking a bike ride, i guess on december 2 1st. tell me specifically what was going on in that conversation. >> well, i called in to get an update and i think that was the sunday -- i'm pretty sure that was the sunday i called him. and as i recall the conversation, he said i want to give you some blunt language and i first want to start out by saying we're very supportive of bank of america. then went one step further and said what i've already said

that -- >> he said, but, we feel very strongly you should not call the mac and if in fact you do, and again, i think he said would -- but it was would or could, as i recall -- and remove the board and management. >> that certainly sounds like a threat to me and an amazing use of power there. tell me about your interactions with timothy geithner. how early in the process was he engaged in this process? >> i had no -- after the confirmation hearings or once he excused himself from the new york fed, i had no contact with mr. geithner. >> but he was involved before he was named and brought in as the treasury secretary, correct? >> he had been involved in the

original t.a.r.p. money, yes. >> right. and tell me about mr. summers, the intersection and place of involvement that he had with the project. >> i personally had no involvement with mr. summers. mr. chairman, i would ask that mr. price's notes from december 2 1st of 2008 and mr. lewis's notes also be entered into the record. >> without objection. >> thank you. >> so ordered. >> tell me about the interaction you continued to have in -- with mr. bernanke and mr. geithner at this point? >> well, i've had very little conversation with -- in fact, i can't recall of a conversation i've had with mr. bernanke in terms of being one on one. i remember council called the

federal reserve advisory council and we -- there were 12 of us and we have dialogue with federal reserve, including mr. bernanke in a group setting. >> any interaction with the administration -- >> gentleman from utah, your time has expired. >> my apologies. >> now yield to the gentleman from maryland, mr. cummings. >> mr. lewis, i've listened to your testimony very carefully and you know, i understand and read about you're a great man. i think one of things you have tried to do today is to walk a very thin line. you just heard republicans and democrats say to some dree that whatever was said to you about losing your job and the

board being dismissed, basically what we've said is i don't buy it. let me -- i assume the minutes are accurate from your board meetings. these things you vote on. the minutes from board meetings -- >> yes,sir, we do -- >> i'm talking about december 22nd, 2008. >> let me read something to you. it says, you've apparently -- mr. lewis reported a series of calls. and you talk about a number of things. this is one thing i found interesting. the second point. this says -- this is what you told your boys, it says the treasury and fed stated strongly that were the corporation to invoke the material adverse change mac clause in the merger agreement with merrill lynch and fail to close the transaction, the treasury and the fed would remove the board and management of the corporation. if that isn't a threat, i don't know what is. if i say i'm going to fire you,

if you don't do what i tell you to do, not only am i going to fire you, but i'm going to fire your board, what you said -- and i know you were caught in a difficult situation. i know that after this merger was done your folks benefited tremendously and i know that bank of america is doing fine now. i'm here to tell you, no matter how great bank of america is doing today, the end does not -- the means does not justify the end. in other words, throughout these transactions we must have honesty and integrity and transparency, period. what i'm saying to you is -- i know you're trying to be nice but here we've got a situation where apparently mr. paulson has told you, do it. so like the nike 181818c8c8c8c88

we do not buy it. so i'm going to give you another chance. he did not feel threatened? do not get us to describe it. we're trying to figure out what you were feeling we want to straighten out this mess. >> i have been pretty consistent. as you have just described -- >> maybe need to be inconsistent and tell us how you felt. >> i did, as i think have set at some point in time, maybe not today, it was a strong influence on my decision. but it was not the only influence. today, it was a strong influence on my decision but wasn't the

only influence. >> i understand. so apparently -- okay. let me ask you this. did mr. bernanke have any influence with regard -- i understand you just answered the question. did he ever say that you should not disclose certain information and do the deal? did that ever come to you in any kind of way from bernanke? >> no sir. well, the -- he never said we should not disclose anything that was discloseable, that would be our decision and i never heard from him on the issue of us not disclosing something. >> anything else -- look like you're trying to go somewhere. >> the second piece i thought you asked me, sir, was the issue of him not wanting us to call the mac and he did express that to us. >> when did he do that? >> he expressed it on more than one occasion. i don't remember which dates but several dates. if you are an experienced man, i understand you have great

judgment, apparently when you thought about this mac thing, it was based upon your own experiences, was it not? yes, sir. >> what were you thinking? >> i was thinking that the losses had accelerated to a point that they were out of line with other institutions and our institution. >> so you still -- if you were to go back, you would thing there was not a mac situation? >> i can't say that there wasn't a mac because we never called it so we just don't know. >> very well. >> if the gentleman would yield for a moment. >> my time is up. >> the gentleman's time is expired. i now yield to congressman flake from arizona for five minutes. >> thank you, mr. chairman. i just want to share my

colleague's skepticism about whether or not this was a threat. it seems completely inkred you house this wouldn't be considered a threat. if this wouldn't be considered a threat, if i could ask you, what would be considered a threat? kidnap the family dog? release your college gpa scores, what is a threat if this is not a threat? >> i'm just trying to describe the circumstances and not put one word to it myself. >> this -- >> it seems from this vantage point, it seems there's sort of a kind of a stockholm syndrome here, you're still regulated by these entities and it seems

you've identified with your cap tors or regulators in some ways here but we would like to have a candid answer here. and i don't know if you can wiggle your pinky finger or give us some sign that nobody else will see, it just -- the big grin, maybe that gives it away. let me tell you from this v vantage point it seems difficult to accept that that would not seem threatening behavior. again, from the notes, i believe mr. price, the cfo took during one of these meetings, identifies hank p, fire board if you do it, invoke the mac. responsible for the country. tim g. agrees. i mean it just seems like there's no other explanation

here. and i can understand maybe from the smile and what not that you agree but can't say it here. but let me just say, if you learned later on that there was a 12 billion in losses that you didn't know about. it wasn't so much what they said but how they said it, the seriousness of which they explained the need for you to move forward with this merger, if not 12 billion, wheres the threshold that you would have said can't do it? can you enlighten us there a bit? >> i can't. because i dealt with the circumstances and i don't know -- what caused that to happen, to your point even if you -- whatever you want to call it, i wouldn't change how i described it.

how compelling was the seriousness of that conversation? what would have compelled you if the losses were twice as big as you did not understand that they were. what if it were $24 billion instead of $12 billion? >> at some point, you could not have made it a viable deal. it was a number, the whole was just too big. >> 24 is just as easy as well. >> remember, this is 8% after- tax dividends that you are paying. at some point, you just not -- he just could not bear the burden. it was painful. it calls for us to have to push out our horizon in terms of liquidation for the deal to

work. >> mr. flake -- >> i would like to associate myself with your comments. myself with your comments and the gentleman from maryland where you are a little inkredhouse when it was stated before the new york attorney general, the gentlemen was threatened. we are oddly enough arguing over when you're threatened you, you feel threatened, but not whether or not there is a threat. we made that pretty clear and i appreciate your sticking to a position of not further indicting those that regulate you. it's our job to get to the truth and i think we have. yield back. >> i now yield to the gentleman from massachusetts, mr. lynch. >> thank you, i want to thank chairman ckucinich as well.

thank you as well, mr. lewis, for coming before the committee. let me go back to a point that mr. cummings and also mr. kucinich raised earlier. mr. kucinich seemed to be hung up on the fact of when there was a significant indicator that merrill lynch was in rapid decline. rather than focus on november of '08. we can go all the way back to fall of '07 when they mounsed an almost $8 billion loss and mr. o neil was forced into retirement. there's a long history of decline here, all be it it accelerated to some degree around the time of your purchase. but there was significant evidence that they had overloaded with collateral debt

obligations and other complex derivatives and they were in pretty tough straits for a while. isn't that true? >> yes,sir, it is true. >> let me ask you, there's a couple of e-mails and unfortunately they are very small up there. let me try to help you. one is from chairman bernanke to a selection of the board of reserve governors. and this is december 21st, 2008, around the time that your thinking about this material adverse change being existent or not. this is from chairman bernanke, i think the threat to use the mac, the material adverse change, is a bargaining chip and we do not see it as a likely scenario at all. nevertheless, we need analyses of that scenario so we can explain to bank of america with some confidence why we think it

would be a foolish move and why regulators will not condone it. the other e-mail is actually sort of reinforces that and that is from jeffrey lacker, who was a president, i believe, of the federal reserve bank of richmond at that time and i think he's a voting member now. this e-mail was also cc to the chairman, i believe. just had a long talk with ben, ben bernanke, i presume, says they think the mac threat is irrelevant because it's not credible and tends to make it more clear that if they, meaning bank of america, play their card and then need assistance, management is gone, period. and then says forgot to tell

them that kl, i believe that's you, ken lewis is near retirement, close. the there's a different dynamic going on here. there is -- remember the context of all of this is the sky is falling, as mr. cummings said. and tremendous pressure on everyone. they think you're playing a game. they think you're throwing this thing out as a red herring in that they think what you're really trying to do and what some people suggest you might have been doing was to leverage taxpayer support by falsely putting this mac out there. the fact that you're going to let this deal crash, walk away, even asserting -- you don't have to win the mac, as you said before, you don't have to win it. this deal needs to stop and then i think the weight of all of the

forces that play there with lehman and everything else, were in some pretty deep trouble. so what i'm asking you is, was that your strategy here? did you use this mac as leverage to force bernanke and paulson to come in with taxpayer support. and i want to note your own firm was in pretty tough shape at the time. everyone seems to think you were the white knight and strong party, as mr. kucinich has indicated, you know, bank of america had its problems too at this time. but tell me what your strategy was and your negotiations there and what was the motivating force behind your decision to put forth this mac? >> thank you, and thanks for

reminding us about -- we were in the middle of a pretty bad financial crisis and we had people of good intentions despite what they've said about me. the -- we grew more and more convinced that there was a distinct possibility that we had a mac as a result of these accelerated losses. >> you didn't disclose that to your shareholders though? >> but the acceleration really took place about a week after -- that's when you saw massive acceleration, not necessarily those days but as a result of the forecast increasing and. so there was -- there was not some wild bluff. we thought we had the real possibility of a mac. >> okay. >> mr. chairman, i yield back. >> the chair recognizes mr.

mchenry. >> thank you, mr. chairman. were there specific details that the federal reserve and treasury told you not to disclose to your shareholders? >> no, sir, neither secretary paulson nor the chairman of the federal reserv mr. bernanke, ever told me not to disclose something that we thought should be publicly disclosed. >> okay. mr. kucinich referenced e-mails and i wanted to get on the record, have you seen -- have you seen the e-mails before today? >> no. >> and i want to make sure we got inthat on the record, mr. chairman, with all due respect to you. as i asked earlier, you've been involved in a number of merger and acquisitions, your institution has been involved in dozens upon dozens over your

career with the bank. to your knowledge have there been material adverse change clauses included in previous deals of this sort? >> virtually every acquisition would involve some material adverse change clause and not totally uncommon to have them invoked. >> has your institution invoked this clause before? >> yes, sir, we invoked it on a deal with sallie mae. >> all right. >> looking at the list of federal reserve regulators who are second guessing your decision or your raising the issue of the material adverse change clause, it's possibly fair to say you've done more of these deals than they have in their careers as bure krats, that safe to say?

>> i'm sorry? >> is it safe to say you've done more deal that's include mac clauses than the bure krats that are second guessing your decision? >> i don't know their backgrounds. >> okay. i understand you're still regulated institution, no need to hit on the federal reserve and their staff there. but there have been reports to go to another subject matter, there have been reports about efforts of various banks to raise capital in the wake of stress test results. what's the status of your capital raising efforts? >> we were asked -- we were required to raise $33.9 billion and i'm pleased to say that we have raised that amount and we will raise more than that. that should be completed sometime toward the end of this month. >> okay.

my constituents are concerned about access to credit. we have a mortgage foreclosure issue that's widespread across this country. can you tell me about -- bank of america's actions as it relates to foreclosure mitigation and helping those folks that are facing the loss of their homes? >> one of the issues with the loan modification issue was that initially the banks were just not staffed up to handle that kind of volume and the different type things that were being asked. since then we've -- we have 7,200 associates that just focus on loan modifications. since july of 2008, so less than a year, we actually have already modified 311,000 loans. >> there's been a discussion about access to credit and whether or not institutions are

lending. with the down turn in the economy, certainly institutions have a more difficult time in a down economy to finds credit worthy individuals and make loans. can you discuss the loans that you've made over the last two or three quarters? >> well, it's -- it's a great question and it's also the key to us getting this country back on track. because the financial system doesn't make loans then we've got an issue. first, i would say i'm very proud that bank of america is the largest lender in the united states. i'm very proud of that. secondly, i can assure that we're making every good loan that we can make. simply put, banks take deposits and make loans. that's how we make money. it's in our enlightened self-interest to do that. if we don't, we don't openty miz

our profits. in a recession this deep and this prolonged, you do get an issue with demand. people start cutting back and spend less an companies expand less. i can't assure that that the loan increases will continue because of loan demand. what i can assure you is we're going to make every good loan there is to be made. >> thank you. >> the gentleman's time is expired. >> the chair recognizes mr. quigley. >> thank you, mr. chairman. good morning. there's been discussion of a new stress test as it relates to our financial institution. i guess the question comes, was the current test good enough, do we need a new one and would either this kind of stress test helped us understand or prevent these issues when all of these

issues took place with your acquisition? >> i do think the stress test was a good one and i think the fact that they probably used higher standards in terms of things getting worse than hopefully they will was helpful too because those things can happen. and so i would -- i thing it's -- i know it's caused us to look at our -- to look forward with a greater sense of possess mix, higher buffers of capital and that will show up in our internal objectives going forward. so i do think it was a very good thing. i don't see any evidence particularly as we talk about there being some signs of economy may be improving somewhat to put another stress test on t