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Awaiting Bernanke, House Panel Subpoenas Fed

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Awaiting Bernanke, House Panel Subpoenas Fed

Anticipating an appearance by the Federal Reserve chairman, a House committee said Friday that it had served the Federal Reserve with a second subpoena for documents related to Bank of America's acquisition of Merrill Lynch.

[u.S. Federal Reserve Board Chairman Ben Bernanke waits for President Barack Obama to arrive for remarks in the East Room of the White House in Washington June 17, 2009. (REUTERS/Kevin Lamarque)]U.S. Federal Reserve Board Chairman Ben Bernanke waits for President Barack Obama to arrive for remarks in the East Room of the White House in Washington June 17, 2009. (REUTERS/Kevin Lamarque)

Representative Edolphus Towns, the New York Democrat who is chairman of the House Oversight and Government Reform Committee, said the panel was seeking additional documents about closed-door discussions by the Fed, the Treasury Department and Bank of America dating from September to January.

The Fed's chairman, Ben S. Bernanke, is scheduled to testify before the committee next Thursday about the Bank of America-Merrill Lynch deal and the central bank's involvement in it.

At a previous hearing on June 11, lawmakers reviewed e-mails and other documents that the committee obtained from the Fed under its first subpoena and heard Bank of America's chief executive, Kenneth D. Lewis, testify that he was pressured by federal regulators in December to complete the Merrill deal.

Lawmakers have accused Mr. Bernanke and the Treasury secretary at the time, Henry M. Paulson Jr., of pressuring Mr. Lewis to go through with the Merrill deal and not to disclose Merrill's financial problems ahead of the transaction's completion in January.

During last week's hearing, Mr. Lewis acknowledged that Bank of America was "strongly considering" walking away from the Merrill deal after it discovered billions of dollars of additional losses at the securities firm.

Mr. Lewis confirmed that Bank of America considered whether the ballooning losses at Merrill constituted a material adverse condition, or M.A.C., that would allow it to scuttle the deal.

Lawmakers read from e-mail messages sent between federal officials, in which the officials wrote that "the M.A.C. threat is irrelevant because its not credible."

Mr. Lewis replied: "This was not some wild bluff. We thought we had the real possibility of the M.A.C."

A lot of nerves will be frayed whichever way this comes out.

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