it was in the best interest of shareholders of bank of america to proceed. and then sometime after you made this decision, he became aware of the $12 billion hole in the balance sheets. and this was on december 14 of 2008. >> that is when we saw the accelerating loss. >> excel rating as in $12 billion additional. the shareholders already voted to approve this based on the information that was provided. but the $12 billion figure that you became aware of, was of such magnitude that it made you believe that in your capacity as the ceo, you would have to consider invoking the mac clause.

. clause would be considered in effect a nuclear option? >> i don't -- >> here's what i mean, if you invoked the mac clause to get out of a deal that you entered into, then there's obviously reputationable consequences in litigation, correct. >> yes, sir, there is that possibility. >> if you lose in litigation, there are financial consequences to your shareholders, correct. >> yes, sir. >> so you wouldn't even consider invoking the mac clause unless there was something of enormous magnitude and consequence to the company and shareholders, correct? >> that's correct. >> in order to invoke the mac clause an avoid the consequences of perhaps losing, would it be prudent in the ordinary course to get financial advice from your financial advisers as to the impact of this $12 billion hole on the business plan that justified the original decision to enter into the agreement? >> well, we had finance people

looking at all of that. so we were looking at that issue. >> well, obviously. this is my question. if you found out about a $12 billion additional hole, whatever model you had about payback and value to the shareholders now was called into question, right? >> i tried to mention this before, but it extended the amount of time that you would get your payback, yes. >> it affected shareholder value, correct? >> yes. >> basically two questions. one, did you get a financial analysis that you reviewed before you made a decision to discuss with the treasury officials the invocation of the mac clause? >> there was financial analysis that i saw, yes. >> these are made available to you? >> they were, yes. >> and what was the conclusion of those financial analyses? >> the conclusion was that you

pushed out your payback or your accretion because you had these preferred shares now that you were having to pay back. >> but that's obvious. i mean the bottom line is was there a conclusion about what the viability of this transaction was? >> well, we still felt strongly that the -- all the strategy issues that were being addressed prior to merrill lynch were being addressed by the acquisition of merrill lynch. >> have you made these financial studies available to the committee for its review? >> i don't know. i don't know what the committee has. >> so what you're saying is you did review financial statements from your adviser, those being whom, by the way? >> our financial advisers are us. >> so all internal. and on the basis of that, you decided that despite the knowledge of the $12 billion hole, it was prudent to proceed, correct? >> yes, sir. >> so whatever threat or whatever word it is we're going

to use for mr. bernanke and mr. paulson interactions, you had come to an independent conclusion on the basis of financial review by your people that it still made sense for your shareholders to proceed, correct? >> no. as i recall, they were done in a context of the receiving the money. >> let's be clear. you're saying two things now, one you, did an independent financial analysis that said it would stretch out the payback time but it's still prudent to proceed but on the other hand, you had bernanke and paulson breathing down your neck so that was a factor? are you saying those two things? >> no, i don't think i a i'm trying to say that we -- >> okay, i don't understand that. because i think you have said those two things. another thing that is very important. i think to sharehold, $12 billion is a candidacy kwens to you, correct. >> yes, it is. >> did you tell your shareho shareholders you had come upon this information that the deal they had voted on was not the deal that was going through because baugh they had a $12

billion hole that was accelerated, did you tell them that? >> the $12 billion is what we discovered later. >> and you think after the fact information is not of interest to investors? >> what i do know is that when our lawyers tell us we have a disclosable event, we disclose it. >> i have to interrupt. >> if i can just ask one final question. if there is an event that you consider so significant that it may allow you to invoke the material adverse consequence contract clause, do you not think that same event is of interest to shareholders and requires you in your duty fiduciary duty to disclose it? >> i would leave that zigdecisi to supreme court lawyer securi outside counsel. >> you're not ceo? >> i'm not a lawyer. >> we have others who have not had an opportunity. the gentleman from virginia.

>> thank you for being here this morning. several questions. one is when did you decide gnth the financial losses incurred by merrill lynch should be disclosed to your hair shlders? >> again, i don't decide on disclosures. we have securities lawyers and many times they talked to exterth counsel to determine that. >> well, presumably, i work for a company, you, as the ceo, are in on those conversations. >> no. they come to me and they are done. >> right. >> when did that happen? when was the decision made and how was it made to disclose or not to disclose to the shareholders of your company? >> we disclosed the losses at merrill lynch consistent with disclosing the agreement we had with the government and consistent with us announcing our earnings on june -- january

16th. >> january? why such a long delay? >> again, i'm not a securities lawyer. that is when -- that is when we announced according to the schedules given to us by our lawyers. >> were you ever encouraged or pressured by anyone at the u.s. treasury or by the federal reserve not to disclose until january? >> no. we were working on a goal of getting everything done at once. >> i'm sorry, i cannot hear. >> we were working on a goal of getting everything de at once so we didn't have an announcement of something that would cause more damage to the economy. but nobody ever told us that we should not disclose a disclosable event. >> so, for example, nobody at the federal reserve and no one

at the united states treasury urged you to manage the timing of the disclosure so that merrill's earnings and the receipt of t.a.r.p. money were all disclosed in january? >> the target was it to do that so that we didn't damage the economy any more. >> so there were discussions about that with the u.s. treasury and with the federal reserve? >> it was about announcing everything at once. >> i understand. but the timing is interesting. let's announce it in january, not in december. was there something critical that happened in in wall street that made it better in january than december? >> there was not an agreement in december. >> i'm sorry? >> there was not an agreement in december. >> there was not an agreement among whom? >> among us. us being the federal reserve and the treasury. >> so there were discussions but not an agreement in december. >> there were discussions but not an agreement, yes. >> did those discussions involve the secretary of treasury himself and a the chairman of the federal reserve himself?

>> yes, they did. >> and yourself? >> yes, they did. >> and the agreement was let's hold off until january because we're not in agreement about when what to disclose and when to disclose it? >> we did not have an agreement on the details or the amounts. >> were the reports that you were reluctant to accept t.a.r.p. funds true? >> i'm sorry, i couldn't hear. >> there was a report that you did it not want to accept t.a.r.p. funding. is that correct? >> it is true that we did not think we needed the t.a.r.p. funds at the time we were asked to take them. >> was there any connection between your reluctance in accepting them and the exhortation from secretary paulson at that time to accept them and the issue of don't disclose the $12 billion worth of losses you've just discovered? >> no. absolutely not. >> it never came up? >> no. >> why did you accept t.a.r.p.

funds if you didn't think you needed them? >> because after hearing the various regulators, i felt like given what they were saying about the potential of the deterioration in the economy that we should have a healthy fear of the unknown. >> how much in t.a.r.p. funds did you accept? >> $15 billion. >> that's a lot of money for insurance against the unknown. especially if your initial reaction was we don't need them. >> right. yes. but, if you then see that credit meltdown of epic proportions that happened in the fourth quarter, it may not have been such a big insurance policy after all. >> my time is almost up. one final question. greg curl replaced amy brinkley as boa's chief risk officer. given the fact that mr. curl fwaled to unless $12 billion of merrill lynch's losses, it is wise to have mr. curl be your

chief risk officer? and did you approve of that decision? >> mr. curl didn't miss the instruments which caused the loss. what happened is we did not anticipate the meltdown of such a significant proportions in the fourth quarter. so we -- he identified everything properly. no one thought things would get as bad as it did in the fourth quarter. and i made that decision. >> you made the decision that mr. kerl should go ahead and become the coo. >> i made the decision for him to become the cro. >> let me announce that we have two votes on the floor and that we will recess for until 12:30, we will be returning at 12:30 and of course continue the questions. so the committee is in recess

until 12:30. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2009]

>> in your testimony you stated that nine days after the shareholders approved the merger you became aware of significant accelerating losses, raising concerns that the bank of america might want to avoiz finalizing the deal due to the revelation of m.a.c. however, it is difficult to understand how this came as a complete surprise given reports by "the new york times" that shortly after the deal was announced in september b of a had quickly installed 200 people at merrill lynch to thoroughly review their books. were any of the 200 bank of america employees responsible for analyzing merrill lynch aware of the potential for the $12 billion loss before you allegedly discovered it in mid

december? >> i apologize if i haven't been clear. we did have people there and we did know that there were losses. it was clear both at our company and theirs. we could see that that was happening. and there were rumors on the street that that was happening across all financial institutions. and we saw evidence of that after the fourth quarter close because we saw most everybody had losseses. the thing that caused us to be concerned was the acceleration that we saw when we got those -- when we got the numbers that we did on the 14th. >> did you feel that the reviews of merrill lynch's books were thoroughly adequate? were they researched and analyzed adequately? >> yes, ma'am. i thought the due diligence was done adequately. we identified the instruments

that we thought might have issues if you have credit deterioration, but we did not expect the magnitude of the deterioration that occurred in the fourth quarter. >> so you're saying that you really weren't aware of the substantial loss before the shareholders' meeting on december 5? >> no, ma'am. we saw losses. but they seemed consistent with what we were hearing about in the marketplace and consistent with what we were seeing at our company. it was only when we saw the acceleration when we got the reports when we did, that caused the alarm. >> well, do you think if you had that knowledge before you would have proceeded with that merger differently? >> well, do you seesy think -- >> well, do you think if you had that knowledge before, you would have proceeded with that merger differently. >> well, i can't, it's hard to predict what i would have done other than what we did when we had them. >> the scenario i just gave you,

if you were aware, would you have proceeded differently? >> i don't know because it didn't occur that way. >> in testimony to the new york state attorney general andrew cuomo, you stated that you had been advised by representatives from the treasury department and the federal reserve not to disclose details of merrill lynch's difficult financial position. so why do you believe that representatives from the federal government would not want you to disclose knowledge you had of merrill lynch's increasingly dire economic position? >> during all of that time, there was never ever a time that the federal reserve or the treasury department told me that we should not disclose something we thought would be a

disclosable event. >> so there was never a time that you were told to hold back on this information? >> not as regards something that should be disclosed. >> okay. remember you're under oath. okay. despite the fact that the plan for a merger was announced on september 15th, 2008, there was no mention of the $20 billion capital injection from the government until january 16th. at what point during the negotiations between the b of a, merrill lynch and federal government was it determined that this money would be necessary for the merger to be finalized? >> the discussions around the injection of the preferred stock took place after we went to the federal reserve and the treasury

on the 17th. and so, during that time, we began to talk about various ways to inject capital and so-called fill the hole. we did not come to a conclusion about the amounts and nature of the structure until some time well into that first first weeks of january of 2009. >> thank you. my time is up. thank you. >> thank you very much, gentlewoman from california. just before i move to other member, let me just sort of ask a couple other questions. mr. lewis, did merrill lynch give you all the information that you needed to make a decision, an informed decision? did you get all the material that you needed in order to be able to make an informed decision? >> yes, sir. they did. and we in fact not only were we

looking at the data but we had an outside firm that looked at the data before, a company run by chris flowers who was looking at the data alongside of us and he had looked at their data some time ago, a w months before then and so they had a very good knowledge of the various instruments and securities. so we actually had two sets of eyes looking at that again, sir, it was not the fact that we didn't identify the securities, it was that we did not expect the credit to deteriorate like it did in the fourth quarter. >> so do you agree that the decision on whether to proceed with the merger was ultimately yours? it was yours? >> well, it was my recommendation to the board and it was mine and the board's decision to go forward, yes, sir. >> thank you very much. i understand that we got out of rotation here.

i understand with mr. connolly next and then go back to mr. jordan. congressman connolly. >> i was thinking, you need to follow -- >> no, no, no then we go to mr. jordan. you yield to him? >> i thank my colleague. briefly, he said. >> i have to get back to the floor. so i thank my colleagues an i thank the chair. mr. lewis, thank you look at the minutes of bank of america dated december 30, 2008. mr. lewis reported. those assurances of detailed notes with the federal regulators. it goes on to say that you discussed in detail, quote, the commitment of the federal regulators to deliver assistance in the form of capital and asset protection to the corporation. in the word commitment is used

at least nine times, but just before the committee recessed for this vote in response to my question, you said there was no agreement in december. in fact, you said that it was for lack of agreement in december that you decided to make the announcement in j january. and that all three parties, treasury, federal reserve and bank of america agreed to that. how do you reckoncile your testimony today with what you told the board on december 30th? >> we were working -- we had an agreement that we would work towards a solution. but during even from december 30th until the time that we signed the agreement, there was back and forth in terms of amounts in terms of structure and in terms of securities to be included in what was then called a wrap. so there was we had an agreement for a solution but we didn't have any kind of agreement as i would think of it as a business person. >> well, what about commitments?

what was your understanding of the commitment? that word used nine times in those minutes. >> commitment to work toward a solution. >> well, but it says that you -- you received as part of that commitment detailed oral assurances from the federal regulators with regard to their commitment. >> yes, sir. >> that sounds like more than a commitment to find a solution. that sounds like it's pretty pr detailed and we've already worked out the solution and i'm verbally sharing with you at the special meeting the nature of that commitment. >> no different structures had been talked about, different amounts have been talked about. there was a back and forth about different types of securities and different types of ways to go about filling the hole. but there was never a specific agreement with specific numbers

and of that sort. it took several more weeks before we could actually come to terms as to exactly what it would look like. >> it's your testimony that it's if a failure to come to a specific agreement in december, that's the reason the announcement was put off until january? >> that and the desire by for the federal reserve and the treasury to have an objective of having it all be able to announced at one time so that it would not spook the capital markets because they were so fragile. >> final question, if i may, was there any intentional reason not to put the agreement in writing? >> nos, because there was not enough specifics to put into writing. >> but at some point there were? >> yes,sir, and that was later. that was in the first few weeks

of january of the following year. >> i want to be clear, under only it is your testimony today there was no intentional evasion or reason to not put the agreement in writing? nobody had a conversation with treasury or the federal reserve or at the bank of america? let's not put this in writing right now? >> i can only -- i can only speak to what was happening at the time. i don't know what was said to everybody. but the two things that i would continue to say, no one, the goal was to get this done comprehensively so it was one time and would not shock the markets with something that was dangling that is needed and then secondly, we had not come to a final conclusion for several weeks. >> i yield back and thank my colleagues for their indulgence. >> thank you, mr. chairman. i know sitting there for three

hours and answering questions is not the greatest thing in the world to be able to have to do. in my first round i asked about whether you felt government and connection with the t.a.r.p. program, exercise any excessive influence and day to day operations and you said, your answer was no. but i want to go back to, and i'm taking this from a may 13th bloomberg news story, documents obtained by judicial watch relative to a meeting that you had with mr. paulson, mr. bernanke and mr. geithner and miss bear. did you and eight other bank ceos meet with them back in october 13th? >> yes, sir, we did. >> tell us what happened at the meeting. what the documents indicate is that you had -- we had a lot of

conversation, discussion about the threat that's been talked about here by just about everyone relative to the mac clause, but it looks like that there was maybe threats here or at least strong suggestions that you initially partake, participate in the t.a.r.p. program. can you tell me about what took place at that meeting and walk me through it, that october 13th meeting? >> the nine chief executives were called by hank paulson or at least i was -- >> let me interject. you said earlier, i believe, too, i forget which member's question, you initially felt your bank and your board did not need any infusion of cash or t.a.r.p. money from the government, is that right? >> yes. >> when did you make that decision as a bank, this

obviously was prior to -- >> that's the first reaction that i had to the fact that we were being offered 15 billion was that we didn't need it. the prior week we raised $10 billion in equity. and that it could be -- i'm speculating, but it could have been that that's why we were offered 15 and not 25 like some of the other big banks were. but as you mentioned, the people that were there, on the other side of the table, there were nine of us, nine bank ceos and each of the people spoke about the possibility of detear y yoration in the economy. it is a little gray but i think it was secretary paulson then began to tell each bank what amount they should take. >> were you required to sign a form at that meeting? >> yes. what we -- >> what did the form say?

>> it basically was a very short form that talked about the interest rate of the preferred and the amount. in fact, we wrote in the amount, it was a blank. each individual wrote in -- >> you wrote in the amount but it was suggested by the treasury secretary. >> we were told what to write in. >> you did that at that meeting? you wrote in the amount at that meet sng. >> not until i called my executive committee. we talked about various things. >> how long did this meeting last? >> it wasn't -- i think it was less than an hour. but, again, it's been a while. >> less than an hour, nine banks decided to take billions of dollars? sign a form, you have to check with your board before you sign the form? >> no, no, we -- i ended up in a position, and i think most of my colleagues ended up thinking that if this group of people

with the knowledge they have of the economy were saying that this may be necessary, you should take it, that we felt like it was probably the right thing to do to have a healthy fear of the unknown. and so on that basis, i called my executive committee and got permission to sign it. >> okay. and did the events of that hour on that day in october, did that weigh on your mind fast forward a few more months in december when you were deciding or thinking about, i think your answer to me earlier was when you called secretary paulson and mr. bernanke and told them about the mac clause, you said you were seriously considering it. i think that was your answer to me earlier. did the events of that october, that one-hour meeting where they put a form in front of you, said you need to sign this and write in the amount, you'll participate whether you like it or not, did those events