Paulson to Testify on BofA/Merrill Lynch in July

AP Henry M. Paulson, US Treasury Secretary

Former U.S. Treasury Secretary Henry Paulson will testify July 16 before a U.S. House of Representatives committee probing the government's role in Bank of America's acquisition of Merrill Lynch, lawmakers said Monday.

The Committee on Oversight and Government Reform is investigating the role of regulators in the purchase, and whether the bank properly notified investors of its concerns about Merrill's troubled financial state.

In a letter to Paulson, committee chairman Edolphus Towns, and Dennis Kucinich, chairman of a related subcommittee, asked Paulson to be ready to answer whether Bank of America needed or requested the $15 billion cash infusion it got from the U.S. government in October 2008 and the $20 billion it got in January 2009.

Paulson's testimony will mark his first high-profile public appearance since he left office in January. He presided over the Treasury during the most tumultuous financial period since the Great Depression and was a key figure in prompting Congress last year to authorize a $700 billion financial market bailout fund.

Federal Reserve Chairman Ben Bernanke, who worked closely with Paulson, testified before the committee last week. He denied that the Fed inappropriately persuaded Bank of America Chief Executive Ken Lewis to continue with the deal, despite Lewis' concern about Merrill's condition.

Lewis had told Bank of America's board that federal officials said if he did not go through with the transaction, "the Treasury and the Fed would remove the Board and management of the Corporation," according to a transcript of that meeting.

The committee has released hundreds of pages of documents that it subpoenaed from the Federal Reserve, which has shined a spotlight on the internal deliberations that took place during the time the deal was being negotiated.

Towns and Kucinich, both Democrats, also said they want Paulson to answer whether the government had any role in persuading Bank of America to acquire Merrill Lynch.

Republicans on the committee have accused regulators of strong-arming Bank of America to complete the Merrill acquisition, while Democrats have often focused on whether Bank of America should have told investors sooner about Merrill's financial troubles.

Following is a copy of the letter the Oversight Committee sent to Paulson confirming the hearing:

Dear Mr. Paulson:

We are writing to confirm your acceptance of our invitation for you to testify at a hearing of the Committee on Oversight and Government Reform on Thursday, July 16,at 10:00 a.m. in room 2154 Rayburn House Office Building.

The purpose of the hearing is to examine events surrounding Bank of America's acquisition of Merrill Lynch and receipt of Federal financial assistance.

In preparation for this hearing, you may wish to review the testimony presented to the Committee on June 11,2009, by Bank of America CEO Ken Lewis, and on June 25, 2009, by Federal Reserve Board Chairman Ben S. Bernanke.

In addition, among the issues you should be prepared to address are the following:

• Did Bank of America need or request the $15 billion it received from the Federal government in October 2008?

• Did Bank of America decide to acquire Merrill Lynch, or was the acquisition suggested by a government agency?

• How and when did the Federal government become aware of the deteriorating condition of Merill Lynch?

• What role did the Federal government play in Bank of America's decision to complete the acquisition of Merrill Lynch?

• Did Bank of America need or request the $20 billion it received from the Federal government in January 2009?

• When, how, and under what circumstances did the Federal government commit to provide additional financial assistance to Bank of America?

• How can the kind of financial disaster this country has experienced over the past year be prevented in the future?

You may submit written testimony for the record, of any reasonable length. In addition to your written testimony, you should be prepared to provide a have minute opening statement and answer questions posed by Members of the Committee' Information for witnesses appearing before the Committee is contained in the enclosed Witness Information Sheet.

In particular, please note the procedures for submitting written testimony at least two business days prior to the hearing.

Should you have any questions, please contact John Arlington or Christopher Staszak of the Full Committee staff at 202-225-5051, or Jaron Bourke of the Subcommittee staff at 202-225-6427.

Sincerely,

Edolphus Towns, Chairman

Dennis Kucinich, Chairman, Subcom on Domestic Policy

—CNBC.com contributed to this report

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