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CNBC TRANSCRIPT: CNBC'S MARIA BARTIROMO SITS DOWN WITH BANK OF AMERICA CHAIRMAN & CEO KEN LEWIS ON CNBC'S "THE CALL" TODAY

CNBC TRANSCRIPT: CNBC'S MARIA BARTIROMO SITS DOWN WITH BANK OF AMERICA CHAIRMAN & CEO KEN LEWIS ON CNBC'S "THE CALL" TODAY

WHEN: Today, Monday, September 15th

WHERE: CNBC's "The Call"

Following is the unofficial transcript of a CNBC interview with Bank of America Chairman & CEO Ken Lewis on CNBC's "The Call."

All references must be sourced to CNBC.

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BARTIROMO: I AM HERE AT BANK OF AMERICA HEADQUARTERS IN NEW YORK WITH KEN LEWIS, CHAIRMAN AND CEO. NICE TO HAVE YOU ON THE PROGRAM. CONGRATULATIONS TO YOU ON ANOTHER MAJOR DEAL FOR YOU.I WANT TO BEGIN THE INTERVIEW LOOKING AT THE PRICE PAID. 70% PREMIUM, SOME PEOPLE ARE CALLING IT, THAT MAY OR MAY NOT BE ACCURATE, GIVEN MERRILL LYNCHWAS AT 26 A WEEK AND A HALF AGO. THE QUESTION REMAINS YOU COULD HAVE PAID CHEAPER IF YOU WAITEDONE DAY.WHY DIDN'T YOU WAIT?

LEWIS: IT'S A QUESTION THAT WE OBVIOUSLY PONDERED OVER THE WEEKEND. AND IT'S NOT NECESSARILY TRUE THAT WE COULD HAVE -- WE COULD HAVE PAID ANOTHER PRICE OR LOWER PRICE ON MONDAY. IT'S TRUE THAT IT'S MORE THAN LIKELY THAT THE PRICE WOULD HAVEDECLINED ON MONDAY. BUT MERRILL LYNCH HAS QUITE A BIT OF LIQUIDITY. AND I THINK THEY COULD HAVE SEEN THEIR WAY THROUGH THIS. AND SO YOU WOULD HAVE THE -- THE ISSUE OF THEM GOING ON THEIR SEPARATE WAY.OR YOU COULD HAVE HAD SOMETHING ELSE COME IN.WE FELT THERE WERE OTHER PEOPLE THAT WERE INTERESTED IN BUYING ASTAKE AND MISSED IT COMPLETELY. YOU NEVER CAN -- MOST PEOPLE CAN'T PICK THE BOTTOM. THE STRATEGIC OPPORTUNITY WAS SO COMPELLING THAT WE FELT LIKE GOING FOR THE LAST DOLLAR HAD TOO MUCH RISK TO IT COMPARED TO SEIZING ON THE OPPORTUNITY AND GOING FORWARD WITH THIS.

BARTIROMO: WHAT IF SOMEBODY ELSE DOES COME IN?ARE YOU PREPARED TO PAY A HIGHER PRICE?

LEWIS: WELL, WE HAVE SOME -- WE HAVESOME THINGS IN THE CONTRACT THATWOULD ACTUALLY CAUSE IT TO BE VERY EXPENSIVE FOR SOMEBODY TO OVERTURN IT.I DON'T THINK THAT'S GOING TO HAPPEN.AND THERE'S ONLY SO MUCH WHEREWITHAL OUT THERE TO COMPETE WITH US.

BARTIROMO: LET ME ASK YOU ABOUT THE WORKPUT INTO IT OVER THE WEEKEND CLEARLY THIS WAS DONE IN A VERY RAPID FASHION.TELL US ABOUT THE DUE DILIGENCE. YOU DID THIS DEAL IN 48 HOURS.YOU TAKE ON MORE THAN A TRILLION DOLLARS IN ASSETS.ARE YOU COMFORTABLE WITH THE DUE DILIGENCE YOU DID?

LEWIS: I REALLY AM. FIRST OF ALL, WE'RE IN THE SAME BUSINESSES. AND, ACTUALLY, WE ARE VERY GOOD,VERY A CORE COMPETENCY OF DUE DILIGENCE AND MAKING ACQUISITIONS. WE KNOW WHERE TO GO LOOK. MANY OF THE INSTRUMENTS ARE SIMILAR TO WHAT WE HAVE. LEVERAGE LOANS YOU ACTUALLY HAVE SOME OVERLAP. AND SO WE -- AND THE METHODOLOGY WE USED ONCOMING TO VALUATIONS WAS VERY SIMILAR.ON TOP OF THAT, WE HIRED J.C. FLOWERS WHO WE KNEW HAD BEEN IN MERRILL LYNCH FOR ABOUT A WEEK LOOKING AT VALUATIONS, LOOKING AT OTHER THINGS. SO WHEN THEY CAME IN, THEIRS WAS JUST AN UPDATE ON WHAT THEY HAD ALREADY DONE.AND SO THE COMBINATION OF OUR REVIEWS AND THEN REINFORCED BY J.C. FLOWERS AND COMPANY'S VIEWS GAVE US GREAT CONFIDENCE THEIR MARKS WERE GOOD. HE ACTUALLY MADE THE COMMENT THAT IT WAS NIGHT AND DAY FROM THE FIRST TIME THEY HAD BEEN IN AND THIS TIME, WHICH IS A CREDITTO THEIR TEAM IN TERMS OF GETTING THE MARKETS RIGHT.

BARTIROMO: STANDARD AND POORS IS TALKING ABOUT YOUR RATINGS DOWNGRADING AND THE EXPENSE OF THIS TRANSACTION. OES THIS MEAN YOU'LL HAVE TO CUT YOUR DIVIDEND, IS YOUR DIVIDEND IN JEOPARDY TO PAY FOR THE DEAL?

LEWIS: THE ISSUE WILL BE, AS WE GO FORWARD, HOW MUCH CAPITAL WE NEED.DO WE NEED TO GROW THIS COMPANY AND MAKE SURE THAT WE ARE -- THAT WE ARE THE BEST IN THE INDUSTRY AND THAT WE CAN -- WE CAN SERVE OUR CLIENTS AND GAINMARKET SHARE AT A CRITICAL TIME. AND SO WE'LL LOOK AT ALL OPTIONS.PEOPLE HAVE MENTIONED THE PROFITPROFIT. WE WANT TO LOOK AT YOUR RISK RATED ASSETS AND MAKE SURE WE'RE TAKING THE APPROPRIATE ONES DOWN. SO THERE ARE A LOT OF THINGS WE CAN DO TO RAISE CAPITAL, INCLUDING, OBVIOUSLY, THE DIVIDEND CUT. AND WE'LL BE LOOKING AT THAT OVER THE NEXT FEW MONTHS. WE'VE GOT A BOARD MEETING IN OCTOBER, AND WE'LL HAVE A BETTER VIEW OF WHAT WE WANT TO DO IN TERMS OF RECOMMENDING TO OUR BOARD. BUT WHAT THE WHOLE FOCUS IS, GET THIS COMPANY AS STRONG AS POSSIBLE TO -- TO MAKE SURE WE CAN TAKE ADVANTAGE OF THE OPPORTUNITIES THAT ARE GOING TO BE BEFORE US IN THE NEXT -- IN THE NEXT FEW QUARTERS.

BARTIROMO: AND NOTHING'S OFF THE TABLE IN TERMS OF DOING THAT?

LEWIS: RIGHT.

BARTIROMO: OKAY.LET ME ASK YOU ABOUT THE BROKERS, THE JEWEL OF THE MERRILL LYNCH FRANCHISE THE FINANCIAL ADVISORS. HOW ARE YOU GOING TO ENSURE THOSE BROKERS STAY AND NOT GO AND LOOK AT COMPETITORS OR OPEN THEIR OWN BUSINESS AT THIS POINT?

LEWIS: WE'RE GOING TO DO SEVERAL THINGS. FIRST, WE'RE GOING TO MAKE SURE WE KNOW WE'RE GOING TO KEEP THE NAME.SECONDLY, WHICH WOULD BE TO ME AN OBVIOUS. WE SHOULD. IT'S A GREAT NAME WORLDWIDE. SECONDLY, WE WILL HAVE SOME RETENTION BONUSES, WILL BE COMMUNICATING ABOUT RETENTION BONUSES. THIRDLY, WE WANT TO TELL THEM THE OPPORTUNITY THEY HAVE WITH THE 8 MILLION CUSTOMERS THAT WE HAVE THAT ARE SO-CALLED MASS AFFLUENT THAT REALLY IS A SWEET SPOT OF MERRILL LYNCH. INSTEAD OF HAVING TO DO CO LDPROSPECTING CALLS, THEY'RE GOING TO BE GETTING A LOT OF REFERRALS FROM THAT HUGE CONSUMER BANKING SYSTEM. IF THEY'LL LISTEN TO A STORY, THEY'RE ACTUALLY MISSING THE OPPORTUNITY OF A LIFETIME IF THEY'RE GOING SOMEWHERE ELSE.

BARTIROMO: AND WHAT OTHER BUSINESSES, OTHER THAN THE BROKERAGE BUSINESS, FINANCIAL ADVISORY BUSINESS, IS MOST COMPLIMENTARY TO BANK OF AMERICA WHERE DO YOU SEE THE BIGGEST OPPORTUNITY AND SYNERGY FOR YOU?

LEWIS: THE BIGGEST ONE OUTSIDE OF THE FINANCIAL ADVISERS IS THE INTERNATIONAL GLOBAL PLATFORM THAT MERRILL LYNCH HAS IN TERMS OF THE INVESTMENT BANKS SIDELINED WITH OUR BIG CORPORATEBANKING INTERNATIONAL CAPABILITIES. AND SO WE HAVE BOTH IN THE U.S. AND INTERNATIONALLY, WE HAVE HUGE CORPORATE BANKING MARKET SHARES. 99% OF THE FORTUNE 500 BANK WITH US HERE. ABOUT 83% OF THE INTERNATIONAL FORTUNE 500. AND SO THAT'S THE STRENGTH OF A COMMERCIAL BANK. WE HAVE THE RELATIONSHIPS. AND SO WE CAN -- WE CAN NOW BRING IN A MUCH BROADER BREADTH OF PRODUCTS TO THE COMPANIES WHO WE KNOW WELL, WHO WE FINANCE, AND WHO WILL BE RECEPTIVE TO THAT.

BARTIROMO: THERE'S AN ENORMOUS AMOUNT OFSTICKY BUSINESS.YOU'VE SAID IN MANY TIMES IN INTERVIEWS WITH ME THATINVESTMENT BANKING IS TOO VOLATILE AND YOU DON'T NECESSARILY WANT TO BE IN THAT BUSINESS.YOU ARE IN THAT BUSINESS NOW IN A BIG WAY. WHAT CHANGED?

LEWIS: WELL, THIS GIVES US THE SIZE AND SCALE TO BE ABLE TO ATTRACT AND RETAIN THE BEST TALENT, TO -- TO NOT HAVE TO BE SO NARROWLY FOCUSED THAT YOU'RE ALWAYS WORRYING ABOUT SCALE, YOU'RE ALWAYS WORRYING ABOUT YOUR ASSOCIATES' QUESTION ABOUT WHETHER YOU'RE COMMITTED TO THE BUSINESS. AND IT'S NOT JUST ABOUT THE INVESTMENT BANK. IT IS ABOUT WEALTH MANAGEMENT ASWELL.AND SO ACCORDING TO HOW YOU -- HOW YOU VALUED THAT WEALTH MANAGEMENT BUSINESS, YOU GOT THEINVESTMENT BANK HOPEFULLY FOR A VERY ATTRACTIVE PRICE.

BARTIROMO: IS IT FAIR TO SAY THAT THE MOST OVERLAP HERE IS IN FIXED INCOME?IS IT FAIR TO EXPECT THAT THAT'SWHERE LAYOFFS MAY COME?

LEWIS: YEAH.I THINK THAT IS OUR STRENGTH, THE FIXED INCOME SIDE AND I THINK -- I THINK MERRILL LYNCH WOULD SAY THAT IS NOT -- THAT IS NOT THEIR STRENGTH. THEY'RE MUCH STRONGER IN SOME OTHER AREAS. SO THAT'S VERY COMPLIMENTARY TO THEM IN THAT SENSE.BUT WE'LL LOOK ACROSS THE WHOLE COMPANY, THE TOTAL INFRASTRUCTURE TO GET THE EXPENSES. IT WON'T BE IN ANY ONE PARTICULAR AREA.THE STAFF AREAS AND TECHNOLOGY, THERE'LL BE A LOT OF REDUNDANCY THERE.WE HAVE A LOT OF OPPORTUNITIES TO CUT EXPENSES.

BARTIROMO: WHAT DOES YOUR GUT TELL YOU?HOW MANY LAYOFFS MIGHT WE SEE?

LEWIS: WE HAVEN'T GOTTEN TO THAT. WE HAVE A PROCESS THAT WE GO THROUGH THAT THE NUMBER OF EMPLOYEES AND WHERE AND STUFF KIND OF COME OUT OF THAT. SO IT'LL BE PROBABLY SEVERAL MONTHS BEFORE WE KNOW WHAT WE THINK WOULD BE AN EXACT NUMBER.

BARTIROMO: PEOPLE WATCHING YOU, KEN, HAVING ACQUIRED COUNTRYWIDE IN AWEEK AND IN A DISTRESSED STATE, U.S. TRUST, OF COURSE LA SALLE, NOW MERRILL LYNCH.AND THEY'RE SAYING, YOU KNOW, HE'S TAKING ON A LOT IN A SHORT PERIOD OF TIME.WHAT DO YOU WANT TO SAY TO PEOPLE WHO SAY, LOOK, ONCE AGAIN, MAYBE YOU'RE TOO EARLY, MAYBE THEY THOUGHT YOU WERE TOO EARLY IN THE COUNTRYWIDE HAVING SEEN THAT STOCK PLUMMET AFTER AGREEING TO THAT DEAL.WHAT DO YOU SAY TO THAT -- THOSEPEOPLE WHO MAY BE SKEPTICAL IN SAYING YOU CAN'T SAY NO TO A DEAL?

LEWIS: RIGHT. THIS COMPANY'S GOING TO BE A THING OF BEAUTY AS WE GET TO THE OTHER SIDE OF THIS -- THIS ECONOMIC DOWNTURN.AND IT WILL -- IT WILL BE THE ENVY OF THE FINANCIAL SERVICES INDUSTRY IN TERMS OF MARKET SHARES. AND THE POWER WITH WHICH WE CAN OPERATE IN THE BEST COUNTRY IN THE WORLD. WE'LL HAVE THE LARGEST MARKET SHARES AND THE BEST SELLER PRODUCTS IN THE BEST REGIONS IN THE BEST COUNTRY IN THE WORLD. AND THEN COMPLEMENTED OBVIOUSLY WITH THE INTERNATIONAL CAPABILITIES OF MERRILL LYNCH.BUT YOU -- IF YOU WANT TO CREATE THAT MACHINE IN THAT FORMIDABLE COMPANY, YOU HAVE TO BE OPPORTUNISTIC.I DON'T KNOW IF ANYBODY CAN EVER PICK EXACTLY THE BOTTOM. WE HAVE TO LOOK A LITTLE LONGER TERM AND LOOK AT THE STRATEGIC BENEFITS. I WILL PREDICT THAT IN A YEAR TOA YEAR AND A HALF WE WILL BE VERY GLAD WE DID COUNTRYWIDE. WE WILL BE VERY GLAD WE DID U.S. TRUST, ET CETERA. AND WE'VE GOTTEN MUCH OF THAT BEHIND US. LA SALLE, THE CONVERSION WILL BEDONE IN OCTOBER.U.S. TRUST IS DONE. THESE COMPANIES ARE INTEGRATED QUICKLY INTO BANK OF AMERICA.

BARTIROMO: WITH THE WONDERFUL VANTAGE POINT THAT YOU HAVE ON THE CONSUMER, LENDING IN GENERAL, NOW REALLY GLOBALLY, WHERE ARE WE IN THIS CYCLE? HOW MUCH MORE UPSET IS THERE TO COME?

LEWIS: SOMEWHERE IN THE -- LATE IN THE FOURTH QUARTER OR EARLY IN THE FIRST QUARTER WE THINK CHARGEOFF LEVELS WILL BEGIN TO STABILIZE. WE THINK HOUSING PRICES COULD CONTINUE TO DECLINE UNTIL POSSIBLY THE LATTER PART OF THE FIRST HALF OF NEXT YEAR. WE'RE STARTING TO BE ABLE TO SEE THE LIGHT. IT'S DIM, BUT WE'RE STARTING TO SEE IT. BUT WE THINK BECAUSE AS THE ECONOMY RECOVERS IN THE SECOND HALF OF THE YEAR, IT'LL STILL BETOUGH FOR FINANCIAL INSTITUTIONS.WE THINK THERE'LL BE LESS BANKING, INVESTMENT BANKING REVENUE. YOU DON'T HAVE THE COMPLEX PRODUCTS OR DEMAND FOR COMPLEX PROKTS. AND THE ECONOMY WILL NOT RECOVERFAST ENOUGH TO CAUSE CHARGEOFFS TO ABATE SIGNIFICANTLY. SO REALLY 2009 WILL BE A TOUGH YEAR, I THINK, FOR THE FINANCIALSERVICES INDUSTRY. AND THEN THE LIGHT -- THE CLOUDSPARTING MAY BE IN 2010.

BARTIROMO: DO YOU THINK WE'LL SEE FURTHER BANK FAILURES?

LEWIS: I WOULD BET ON THAT, YES. I THINK THE SMALLER ONES.I DON'T THINK WE'RE GOING TO SEE BIG ONES.BUT THE LESS DIVERSE, PARTICULARLY ONES THAT HAVE CONSENTRATIONS OF COMMERCIAL REAL ESTATE.THESE WILL BE TOUGH TIMES.

BARTIROMO: CAN YOU CHARACTERIZE FOR US THE TIER THREE ASSETS, THE LEVEL OF ASSETS THAT ARE THE RISKIEST OUT THERE, WOULD YOU BE PUTTING THE SAME MARKS THAT LEHMAN -- WOULD YOU BE PUTTING THE LEHMAN MARKS ON THE MERRILL BALANCE SHEET?

LEWIS: THE MARKS AT MERRILL LYNCH ARE MUCH MORE -- ARE VERY CONSERVATIVE. AND SO I THINK IF -- IF I COULD TURN IT, THEIR MARKS WOULD BE VERY SIMILAR TO OUR MARKS.THE MERRILL LYNCH MARKS.

BARTIROMO: I SEE.AND WHAT WAS IT THAT TURNED YOU OFF ABOUT A POSSIBLE LEHMAN COMBINATION?

LEWIS: WE -- WE THOUGHT ALL ALONG THAT GOVERNMENT ASSISTANCE WOULDBE REQUIRED.AND THAT WASN'T AVAILABLE.

BARTIROMO: AND SO THAT'S WHY YOU WALKED.DO YOU SEE RIPPLE EFFECTS? DO YOU HAVE EXPOSURE TO THE LEHMAN SITUATION AT THIS POINT --

LEWIS: WE HAVE MINIMAL EXPOSURE TO LEHMAN.

BARTIROMO: WHAT ABOUT AIG.HERE WE HAVE THEM STRUGGLING FORCAPITAL AS WELL WHAT ARE THE RIPPLE EFFECTS THERE?

LEWIS: THAT WOULD BE SIGNIFICANT THROUGHOUT THE WHOLE INDUSTRY. I DON'T KNOW OF A MAJOR BANK THAT DOESN'T HAVE SOME SIGNIFICANT EXPOSURE TO AIG. SO THAT WOULD BE A MUCH BIGGER PROBLEM THAN MOST THAT WE'VE LOOKED AT.

BARTIROMO: WOULD YOU SAY, THEN, THAT IT'S PROBABLY FAIR TO SAY THAT THE TREASURY SHOULD BE SERIOUSLYTHINKING ABOUT SOME KIND OF A BACKSTOP FOR AIG THE WAY IT DID WITH FANNIE, FREDDIE, AND BEAR STEARNS?

LEWIS: I DON'T THINK -- I DON'T THINK NECESSARILY AS -- AS PRECISE AND THE MAGNITUDE OF FREDDIE AND FANNIE.BECAUSE THEY DID HAVE AN IMPLICIT GOVERNMENT GUARANTEE. BUT I HOPE THEY FIND SOME WAY TO -- EITHER THE NEW YORK FED OR WHOMEVER, TO BACKSTOP THEIR LIQUIDITY AND TO GIVE THEM TIME TO GET OUT OF THIS.

BARTIROMO: TELL US ABOUT THE DEPOSIT CAP.BEFORE THE MERRILL LYNCH DEAL, YOU WERE JUST UNDER THAT 10% CA IN TERMS OF DEPOSITS.DOES THIS AFFECT THAT AT ALL?ARE ALL OF YOUR DEPOSITS INCLUDED IN THE OVERALL NUMBER HERE?HOW IS THIS BEING DONE IF YOU ARE RIGHT UNDER THAT CAP?

LEWIS: ALL RIGHT.AND, ACTUALLY, WITH COUNTRYWIDE WHO HAD ABOUT $60 BILLION IN DEPOSITS, THAT WOULD HAVE TAKEN US OVER.THEY WEREN'T INCLUDED ORIGINALLY. BUT AFTER YOU BRING THEM IN, BECAUSE THEY WENT S AND L., THEY DO COUNT. WE'RE PROBABLY OVER THE CAP AT THE MOMENT. BUT THE ASSET -- OR THE DEPOSITS AT MERRILL LYNCH WERE EITHER IN A THRIFT OR AN INDUSTRIAL LOAN CORPORATION.AND THOSE DO NOT COUNT. SO THEY WILL AFTER WE BRING THEMIN, BUT NOT BEFORE.

BARTIROMO: KEN, HOW DID THIS HAPPEN? HERE WE ARE LOOKING AT FANNIE AND FREDDIE ON THE BRINK NEEDINGHELP, BEAR STEARNS, LEHMAN BROTHERS CHAPT TER 11. VIRTUALLY EVERY FIRM RUN BY VERY SMART PEOPLE, I THINK, HAS TAKEN ON AN ENORMOUS AMOUNT OF RISK.AND SEEN THEIR BUSINESSES CHANGE DRAMATICALLY AND GET SO MUCH SMALLER.CAN YOU LOOK BACK AND TELL ME HOW THIS HAPPENED?

LEWIS: IT'S REALLY HARD.AND OBVIOUSLY A LOT OF US HAVE THOUGHT ABOUT THAT BUT I THINK FREDDIE AND FANNIE ARE A LITTLE DIFFERENT.BECAUSE I THINK MOST PEOPLE THOUGHT THAT WAS AN ACCIDENT WAITING TO HAPPEN.I THINK MR. GREENSPAN SAID BECAUSE IT WAS A MODEL THAT DIDN'T WORK. YOU EITHER GOT TO BE PRIVATE OR GOVERNMENT OWNED.YOU CAN'T BE QUASI. THERE ARE TOO MANY CONFLICTING SIGNALS. ON THE OTHERS, EXCESSIVE LEVERAGE, GREED, TRYING TO FOLLOW YOUR COMPETITOR AND NOT WILLING TO LOSE MARKET SHARES.ALL THE THINGS THAT YOU GET IN HUGE PROPORTIONS THIS TIME.AND WHY THE INDUSTRY DIDN'T RECOGNIZE THAT QUICKER AND REACTTO IT IS A QUESTION I THINK A LOT OF US WILL BE PONDERING FOR A LONG TIME.

BARTIROMO: AND WHEN YOU LOOK AT THE BUSINESSES TODAY, CUSTOMERS OUT THERE, PEOPLE WHO HAVE DEPOSITS IN YOUR BANK AND MONEY AT MERRILL LYNCH ARE WONDERING, IS MY MONEY SAFE, WHAT CAN YOU TELL THEM TODAY?

LEWIS: WELL, YOU'VE GOT OBVIOUSLY INTHAT -- IN BOTH THOSE CASES YOU'VE GOT TWO VERY STRONG INSTITUTIONS.OF COURSE, BANK OF AMERICA IS A VERY, VERY STRONG DIVERSE INSTITUTION. I THINK WE WERE ABOUT 68% OF THEPROFITS OF THE INDUSTRY IN THE SECOND QUARTER.SO THAT WOULD TELL YOU SOMETHING. BUT -- AND YOU'VE GOT THE -- WITH THE COMMERCIAL BANK YOU'VE GOT THE FDIC INSURANCE.I HOPE THEY'RE NOT CONCERNED ABOUT THE SAFETY OF THEIR MONEY.THAT REALLY ISN'T AN ISSUE WITH INSTITUTIONS LIKE THE TWO YOU JUST MENTIONED.

BARTIROMO: ONE PERSON I SPOKE WITH LAST NIGHT SAID TO ME, YOU KNOW, THERE'S SUCH A STRONG CULTURE ATMERRILL LYNCH.MOTHER MERRILL. WE'VE BEEN TALKING ABOUT THIS FOR A WHILE NOW, BECAUSE JOHN THAIN COMES IN AS AN OUTSIDER AND HE WAS FACED WITH THAT QUESTION.HOW WILL YOU KEEP THAT CULTURE ALIVE AT MERRILL LYNCH?

LEWIS: FORTUNATELY, WE'RE SO SMALL IN THE FINANCIAL ADVISORY AREA, WE'VE ONLY GOT ABOUT 2,000 VERSUS MERRILL LYNCH'S 16,000.WHAT I WOULD DO IS -- WHAT I WANT TO DO IS KEEP THAT ORGANIZATION INTACT, KEEP THE LEADERSHIP INTACT, AND THEREFORE IF YOU DO THAT, YOU'VE GOT YOUR CULTURE INTACT.

BARTIROMO: HOW MUCH IN TERMS OF COST SYNERGIES DID YOU BAKE INTO THISPRICE THAT YOU'RE PAYING FOR MERRILL LYNCH.

LEWIS: ABOUT $7 BILLION. ABOUT 10% OF THE COMBINED EXPENSE BASE.

BARTIROMO: AND YOU EXPECT THE DEAL TO CLOSE IN THE FIRST QUARTER?

LEWIS: CORRECT.EARLY IN THE FIRST QUARTER.

BARTIROMO: DID YOU ASK REGULATORS FOR HELP IN THIS SITUATION? OBVIOUSLY THE GOVERNMENT WASN'T THERE FOR LEHMAN BROTHERS.BUT DID YOU ASK OR TRY TO PURSUE ANY HELP OR BACKSTOP FROM THE GOVERNMENT ON THIS?

LEWIS: NONE. ABSOLUTELY NOT.

BARTIROMO: YOU SAW THIS DEAL. I KNOW JOHN THAIN MADE THE OVERTURE. CAN YOU TELL ME WHAT HAPPENED?

LEWIS: YEAH. HE CALLED ME FAIRLY EARLY SATURDAY MORNINGTIME TO TALK.AND TALK ABOUT THE STRATEGIC OPPORTUNITIES.AND I SAID, YEAH, WE'VE OBVIOUSLY -- I KNOW JOHN. AND WE'VE FOLLOWED MERRILL LYNCH FOR A LONG TIME.YOU CAN'T DO A STRATEGIC PLANNING SESSION AND LOOK AT THE OPPORTUNITIES AND NOT HAVE MERRILL LYNCH OUT THERE. SO WE'VE KNOWN ABOUT THE COMPANY.WE'VE FOLLOWED THEM.THEY'RE A BIG CLIENT. I WAS IN NEW YORK IN ABOUT 2 1/2 HOURS. I WAS IN MIDTOWN IN ABOUT 2 1/2 HOURS.WE BEGAN TALKING.

BARTIROMO: AMAZING.AND THE DEAL HAPPENS 48 HOURS LATER.KEN, CAN YOU TELL US A LITTLE ABOUT YOUR VISION AS FAR AS WHATTHIS INDUSTRY LOOKS LIKE WHEN, IN FACT, WE DO COME OUT OF THIS? CLEARLY WE'RE STILL IN THE MIDDLE OF THIS UPSET. YOU SAID MAYBE THE END OF '09 MAYBE INTO 2010. THE FINANCIAL SERVICES SECTOR, WILL IT BE A LOT SMALLER?HOW ARE THESE FIRMS GOING TO MAKE UP THE LOST REVENUE WHICH WAS SO SIGNIFICANT WHEN YOU LOOK AT MORTGAGES ON TOP OF DOT COM, SO MANY BUSINESSES THAT HAVE DRIED UP?

LEWIS: I'VE SAID FOR A LONG TIME THERE WERE TOO MANY BANKS CHASING TOO FEW DEALS. I'VE ALSO SAID I DON'T THINK THEI NVESTMENT BANKING MODEL WOULD WORK LONG TERM, WHOLESALE FUNDING IS A TOUGH WAY TO ALWAYS HAVE TO GO. I WAS A LITTLE PREMATURE.IT TOOK SEVEN YEARS TO BEGIN TO HAPPEN. BUT I STILL BELIEVE THAT, THAT A WHOLESALE FUNDED INVESTMENT BANK IS A TOUGH WAY TO GO.PARTICULARLY IN THIS ENVIRONMENT, PARTICULARLY GOING FORWARD.SO I THINK YOU'LL SEE SOME MORE CONSOLIDATION. NOW, YOU MAY HAVE AN INVESTMENT BANK BUY A COMMERCIAL BANK YOU COULD DO THAT.BUT I WOULD BE SURPRISED IF -- IF BOTH OF THE BIG ONES REMAINING DON'T LOOK DIFFERENTLY OVER THE NEXT YEAR OR TWO YEARS. AND THEN WITH THE COMMERCIAL BANKING BUSINESS, WE'VE ALWAYS SAID THAT IT'S GOING TO BE MORE OF A BAR BELL, THAT YOU'RE GOING TO HAVE BIGGER AND BIGGER BANKS, BUT FEWER.AND THEN MUCH FEWER SMALLER -- I MEAN, NORMAL SIZE BANKS. YOU'LL ALWAYS HAVE THE COMMUNITY, THE VERY SMALL BANKS.IT'S GOING TO BE MORE DIFFICULT EACH AND EVERY DAY FOR MID-SIZED BANKS TO COMPETE WITH LARGE BANKS BECAUSE THEY'VE GOT THE BETTER FUNDING, THEY'VE GOT A BETTER CALL STRUCTURE, AND BETTER BRANDS FOR THAT MATTER.

BARTIROMO: SO RIGHT NOW WE HAVE, WHAT, 9,000 BANKS? 9,000 BANKS IN THIS COUNTRY.WHAT WILL YOUR PREDICTION BE AS FAR AS HOW MANY THERE ARE IN THE NEXT FIVE YEARS?

LEWIS: GOSH, I HAVEN'T THOUGHT ABOUTTHAT. MAYBE HALF.

BARTIROMO: HALF.AS YOU LOOK AT THE COMPETITIVE LANDSCAPE, WHAT DO YOU NEED TO DO TO BEST COMPETE AT THIS POINTWITH JP MORGAN WHO CLEARLY IS RIGHT THERE, THE TWO OF YOU ARE THE GIANTS, SO WHAT ARE YOU THINKING ABOUT AS YOU SEE YOUR EFFORTS TO CONTINUE TO GET STRONGER AND GLOBAL? WHAT DO YOU NEED TO DO NOW?

LEWIS: FIRST, WE NEED TO HAVE BOTH EXISTING COMPANIES FOCUS ON THEIR CLIENTS AND NOT GET DISTRACTED BY THIS. OBVIOUSLY, YOU'VE GOT A LOT OF WATER COOLER TALK AT THE MOMENT BETWEEN BOTH AND PROBABLY A LOT OF OTHER INSTITUTIONS AS WELL. SO THE FIRST THING WE'LL DO IS SAY, REMAIN FOCUSED ON YOUR BUSINESSES AND YOUR CLIENTS.AND IF YOU HAVE SOMETHING TO DO WITH THIS TRANSITION OF THIS MERGER, WE'LL LET YOU KNOW. BUT OTHERWISE DO YOUR JOB. AND THEN WE -- AND THEN, OF COURSE, WITH THE TRANSITION TEAM, FLAWLESS TRANSITION, LET'S NOT LOSE ANY OF OUR ASSOCIATES, LET'S NOT LOSE ANY CLIENTS.THEN FINALLY, GOING FORWARD, IT'S GOING TO BE EXECUTION, EXECUTION, EXECUTION.THAT WILL REALLY BE ALL WE'LL HAVE TO DO.THAT'S NOT EASY.BUT IF WE EXECUTE WELL AND WE WILL, THEN AS I SAID, WE HAVE THE OPPORTUNITY OF A LIFETIME.

BARTIROMO: AND, OF COURSE, WE SEE SITUATIONS LIKE WASHINGTON MUTUAL NOW ON THE BRINK ANDOTHERS.ARE THERE OTHER ASSETS OUT THERE?YOU'VE GOT A LOT ON YOUR PLATE.I RECOGNIZE THAT AND INTEGRATING ALL OF THESE COMPANIES HAS TO BE --

LEWIS: NOT EASY.

BARTIROMO: -- A TOUGH SITUATION.FIRST OFF, HOW ARE YOU PLANNING ON DOING THAT? WHEN DO YOU FEEL THAT YOU COULD STEP BACK AND SAY, OKAY, THIS COMPANY IS NOW IN PLACE AND THE INTEGRATION IS DONE AND WOULD YOU CONSIDER SNAPPING UP, YOU KNOW, BEING THERE FOR WASHINGTON MUTUAL OR, PERHAPS, MAYBE JAIME DIAMOND IS DOING THAT RIGHT NOW,TRYING TO FIGURE WHAT'S NEXT THERE.

LEWIS: WASHINGTON MUTUAL, NO.A LOT OF THAT IS -- NOT TO DEMEAN WASHINGTON MUTUAL.TOO MUCH REGIONAL OVERLAP.WE DON'T NEED ANYTHING ELSE GEOGRAPHICALLY. WE'RE IN 78% OF THE POPULATION BASES. AND EVEN MORE SO WHEN WE -- WHEN MERRILL LYNCH COMES IN BECAUSE THEY'LL BE IN SOME PLACES THAT WE'RE NOT. AS IS COUNTRYWIDE. AGAIN, THIS IS ABOUT EXECUTION, EXECUTION, EXECUTION.BECAUSE THERE'S -- WHAT ELSE WOULD WE NEED OR WANT?

BARTIROMO: OKAY.THIS IS A GREAT CONVERSATION.WE SO APPRECIATE IT.CONGRATULATIONS TO YOU ONCE AGAIN ENGINEERING A SMART DEAL FOR YOUR SHAREHOLDERS.KEN LEWIS, CHAIRMAN AND CEO OF BANK OF AMERICA JOINING US HERE AT HIS NEW YORK OFFICES.



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