Bank of America chief executive Kenneth Lewis on Thursday avoided lawmakers' questions about government pressure to complete the purchase of troubled investment firm Merrill Lynch.
Lewis, appearing on the opening day of a US House of Representatives investigative hearing on the acquisition, said several factors persuaded him to follow through on the takeover of Merrill even after he learned the firm's losses had ballooned in spectacular fashion.
Lewis acknowledged believing that if Bank of America backed away "the government could or would remove management and the board."
But asked specifically if he were "pressured," Lewis replied: "It's hard to find the exact right word to describe what I just described. So I've found as I've tried to have different words that it's best just to describe it and let people come to a conclusion."
Congress opened the inquiry after documents released by New York state Attorney General Andrew Cuomo indicated that top US Treasury and Federal Reserve officials threatened to push out bank management and board members if the takeover were not completed.
The documents also showed regulators cautioned Lewis not to disclose the extent of Merrill's troubles because of fears of a "disaster in the financial markets."
Lewis told lawmakers that "there were also other considerations" if Bank of America decided to back away, citing a "material adverse change," or MAC.
"You weren't assured you'd win the MAC" dispute, he said, adding that the bank could be "subject to severe lawsuits."
"And so, we thought given the fact that the government felt that strongly and the fact that there was a risk (of litigation) ... we felt like because of all those factors that it was in our best interest, that is Bank of America shareholder best interest, to go through with the merger."
The Federal Reserve has denied pressuring Bank of America but Lewis noted that there was growing concern about a meltdown of the financial system if Merrill were not rescued.
"We and the government explored government support as a way to limit the risk of proceeding with the transaction. We both were aware that the global financial system was in fragile condition and that a collapse of Merrill Lynch could hasten the crisis," he said.
"For its part, Bank of America concluded that there was serious risk to declaring a material adverse change and that proceeding with the transaction with governmental support was the better course. This course made sense for Bank of America and its shareholders, and it made sense for the stability of the markets."
Representative Jim Jordan said the probe "has raised troubling questions about potential abuses of government power."