By Silla Brush - 10/05/09 09:10 PM EDT
House lawmakers plan to continue their
months-long investigation into a controversial deal between Bank of
America and Merrill Lynch at the height of the financial crisis, a
Democratic aide said on Monday.
At the most tumultuous period of the crisis last September, Bank of America agreed to acquire Merrill. But in December, Bank of America considered pulling out of the deal amid mounting losses at Merrill. The deal eventually went through in January, but the House Committee on Oversight and Government Reform has held three hearings about the deal and whether federal officials threatened or pressured Bank of America to complete the deal.
The hearing was also slated to consider the ongoing court case over a $33 settlement reached between the SEC and Bank of America about bonuses paid to Merrill employees. A bankruptcy judge in September rejected the deal, raising questions about the bank's communications to shareholders about the bonus payments.
House Oversight Chairman Rep. Edolphus Towns (D-N.Y), ranking member Rep. Darrell Issa (R-Calif.), and subcommittee chairman Rep. Dennis Kucinich (D-Ohio) have led the investigation in the House.
Neil Barofsky, the Special Inspector General over the Troubled Asset Relief Program (TARP), said on Monday that government officials at the Federal Reserve and Treasury Department acted to support the broader financial system and did not find any wrongdoing in their communications with the banks.
Barofsky in his report said they, "acted based on their concerns for the financial markets as a whole." Bank of America received $25 billion from the TARP program as one of the first nine banks to receive aid. The bank later received $20 billion and an asset guarantee from the federal government.
Federal officials believed that if the deal fell apart the financial crisis could be further destabilized. Barofsky's office also concluded that federal officials did not find anything to indicate Treasury and Federal Reserve officials instructed Bank of America executives to withhold public disclosure of the losses at Merrill Lynch.