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February 9, 2010

  • BofA Under Fire, Pt.2
      Unveiling of a deal gone bad.

    Previous...

    On January 16, 2009, the Treasury Department announced that Bank of America, the world's largest credit card company, requested and will receive an additional $20 billion in taxpayers' money from the U.S. Government's Troubled Asset Relief Plan (TARP). The money is expected to help the credit card company complete its merger with Merrill Lynch. The bank had already received $25 billion in TARP funds; $15 billion was acquired in October, 2008 and another $10 billion was injected into the company when the Merrill Lynch merger was completed on the first of January 2009. It was reported that the credit card giant grew more concerned about the state of affairs at Merrill and that they took the action to avoid a "systemic risk." The announcement sent BofA's stock sinking downward by 18 percent.

    On February 11, 2009, BofA's Ken Lewis along with the CEOs from seven other credit card companies and banks that also received taxpayers' money from the TARP program were called to testify in Washington, D.C. regarding the use of the TARP funds pertaining to bonuses. Lewis was questioned by the House Financial Services Committee about the Merrill Lynch bonuses. He told the committee that the BofA bank and credit card company was paying reduced bonuses. Furthermore, Lewis told the committee that the bank had urged Merrill to cut bonuses for top executives. However, he noted that BofA had no legal right at the time to tell Merrill what to do, since it was still an independent company.

    Shortly after stockholders in Atlanta took aim at the credit card magnet, North Carolina's Attorney General, Roy Cooper launched his own investigation into the bonuses Bank of America (BofA) paid Merrill Lynch executives. In February, 2009, Cooper demanded that BofA disclose the amount paid as well as an explanation "as to the appropriateness of any bonuses while public money is being provided to the bank." Cooper's demands required the bank produce records pertaining to the bank's bonuses as well as Merrill Lynch's by March 4, 2009.

    Continued...
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