Some excerpts from the e-mails released by the House Government Oversight Committee Thursday as part of its investigation into the Fed’s role in Bank of America’s purchase of Merrill Lynch.
THE SMOKING GUN: Jeffrey Lacker, president of the Richmond Federal Reserve Bank, in a Dec. 20 e-mail to other Richmond Fed officials: “Just had a long talk with (Federal Reserve Chairman) Ben (Bernanke). Says they think (Bank of America’s threat to back out of Merrill purchase) is irrelevant because it’s not credible. Also intends to make it even more clear that if they play that card and then need assistance, management is gone.”
Lacker added, presumably tongue-in-cheek, “Forgot to tell him (Lewis) is near retirement.”
(Bernanke on Thursday denied ever threatening to oust Bank of America CEO Ken Lewis and said he never told anyone else to, either).
DOING THE DEAL: Bernanke, in a Dec. 21 e-mail to two members of the Fed’s board: “Paulson has told Ken Lewis that the government will stand behind the combined company. Lewis has withdrawn his threat to … get out of the deal with Merrill Lynch.”
Lacker wrote in another e-mail Dec. 23 to his colleagues at the Richmond Fed: Bernanke’s “sense is that (Lewis) is just generally anxious about the merger, not trying to shake anyone down.”
Jennifer Burns, vice president of the Richmond Fed, responded: “I don’t think they were ever really trying to shake anyone down. We paint a bad picture of them — they are really difficult and often unlikable — but I think they have seen what has happened with other firms that have made bad acquisitions and they are worried. Me too!”
PLAYING HARDBALL: Mac Alfriend, another vice president at the Richmond Fed, wrote in a Dec. 20 e-mail: “Some very preliminary thoughts on getting a pound of flesh out of Lewis.”
“Should we do this as part of the agreement to bail them out or just let them know that we will be contacting them … in January,” he added.
INCOMPETENT BANKERS? Alfriend wrote an e-mail to Lacker and Burns Dec. 23, regarding Lewis: “I think he is worried about shareholder lawsuits; knows they did not do a good job of due diligence and the issues facing the company are finally hitting home and he is worried about his own job after cutting loose lots of very good people.”
Phone calls to Alfriend and a spokeswoman for the Richmond Fed weren’t returned.
NATIONALIZATION: Kevin Warsh, a member of the Federal Reserve’s Board of Governors, regarding additional assistance for Bank of America, in a Dec. 30 e-mail: “Worried too much about nationalizing the whole thing.”
Patricia Mosser, a senior vice president at the New York Fed, wrote Jan. 16, the day Bank of America received $20 billion from the government’s rescue fund: “And there you have it. Nationalization here we come.”

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