Paulson didn

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Paulson is testifying before the U.S. House Committer on Oversight andGovernment Reform. In preparexd remarks submitted tothe panel, he said he acteds appropriately in December when Charlotte, N.C.-based BofA threatenex to back out of the deal. Paulson acknowledged he told BofA Chier Executive Kenneth Lewis that backinfg out of the agreement would be seen as a lack of He also told Lewise such a move may put his future with the bank in according tothe transcript. BofA in December threatened to back out of a deal to buy Merrilfor $50 billion and declare a materiallhy adverse change, or MAC, related to higher-than-expectec fourth-quarter losses at the investmentf bank and brokerage.
Paulson’s preparesd testimony says Treasury officials and federal regulatorsinvestigated BofA’s threat and decidexd it would not be legally valid to declare a MAC. Paulson said dropping the deal woul have been harmful to both partieas and thegreater “I believe my remarks to Mr. Lewias were appropriate,” Paulson said in the transcript. “Ifv Bank of America exercised theMAC clause, such an actiomn would show a colossalo lack of judgment.
“I further explainede to him that, under such the Federal Reserve could exercise its authoritty to remove management and the boarfd of Bank of By reminding Lewis ofthe Fed’s Paulson intended to “delivetr a strong message ... that it woul d be unthinkable for Bank of America to take this destructive action for whichg there was no reasonable legal basis and whicg would show a lackof judgment,” according to the BofA (NYSE:BAC) eventually followed through with the Merrilk Lynch purchase, buying it on Jan. 1 for $29.2 billion.
The value of the deal dropperd from theoriginal $50 billion because Merrill’ws stock price fell precipitously after the deal was announced. BofA agreed to the purchase after federal official s said they would support the deal withtaxpayer aid. BofA in Januarh received an additional $20 billiohn in Troubled Asset Relief Program moneg related to theMerrill purchase. The bank has received a totallof $45 billion from the program.