WASHINGTON — At a congressional hearing Tuesday probing Bank of America Corp.'s deal for Merrill Lynch & Co. Inc., one question loomed: who will succeed Ken Lewis at the helm of the Charlotte giant?
Testifying before the House Oversight Committee, B of A directors Charles Gifford and Thomas May refused to say whether Brian Moynihan, the bank's president of global consumer, small-business and card services, would be named to the top job.
"I'm trying to figure out if this is the guy that we are going to face when we are trying to deal with Bank of America, where we've got $45 billion invested," asked Rep. Elijah Cummings, D-Md., referring to investments the government has made in B of A through the Troubled Asset Relief Program. "I'm just trying to figure out, is this the face that we are going to be facing? I'm not asking for your decision, just whether he's one of your top candidates."
Sitting next to the directors, Moynihan kept quiet as Gifford struggled with a response.
"He is a very talented executive at Bank of America," Gifford said.
The exchange highlighted the evolution of the congressional investigation, which initially centered on whether government officials forced B of A into the Merrill deal but seemed to lose much of its focus by Tuesday — the committee's fourth hearing on the matter.
Lawmakers questioned B of A officials on everything from executive compensation to when the bank would repay Tarp funds and how much it currently charges credit card customers.
The officials were pressed on why B of A fired its general counsel, Timothy Mayopoulos, nine days after he told executives that the bank had a weak case for invoking a "material adverse change" clause that could dissolve the merger amid growing losses at Merrill.
Mayopoulos, also testifying at Tuesday's hearing, said he was surprised by his dismissal and had no clue why it happened. "I was stunned," he told the committee. "I had never been fired from any job, and I had never heard of the general counsel of a major company being summarily dismissed for no apparent reason and with no explanation."
Lawmakers also expressed suspicion after Moynihan, who initially succeeded Mayopoulos, reported directly to Lewis. Mayopoulos never reported to the chief executive and was fired by his boss, B of A's chief risk officer.
"Do you think reporting directly to the CEO can affect the general counsel position?" Rep. Diane Watson, D-Calif., asked Mayopoulos.
"I think it can affect the general counsel position," he responded.
Moynihan said that before he assumed the general counsel's role, he already reported directly to Lewis so the move "was not a change in my reporting relationship."
Moynihan said he believed the bank had a case to walk away from Merrill. He told the committee he was unsure why Mayopoulos was terminated, but said the bank needed to trim its executive ranks in light of the economic turmoil.
"I do believe he was capable of doing the job," Moynihan said, adding that he did not think Mayopoulos was fired because he disagreed with B of A's read of its case. "I have no knowledge that that had anything to do with it."
Other lawmakers left the hearing unconvinced.
"I want to make an observation with regard to Mr. Mayopoulos," said Rep. Edolphus Towns, the New York Democrat who chairs the oversight panel. "He doesn't know why he was fired. His boss, Mr. Moynihan, says he doesn't know why he was fired. In fact, no one seems to know."
Towns continued: "Either it was divine intervention or someone didn't like his legal advice," he said. "I'm leaning toward the last one. It looks to me like Ken Lewis and others at the company weren't about to tolerate someone who might get in the way."
Fed Chairman Ben Bernanke, former Treasury Secretary Henry Paulson and Lewis, who is set to retire at yearend, have already testified before the committee on their role in the Merrill deal. Bernanke denied pressuring Lewis to complete the deal but Paulson unapologetically told the committee in July that he threatened to fire Lewis and the B of A board if the bank did not close on Merrill.
"I was attempting to send a very strong message to Ken Lewis in terms of how strongly the Fed and Treasury viewed this matter," Paulson said.
Lawmakers still spent much of Tuesday's hearing debating whether the government forced B of A into the deal against its will and ultimately at a cost of $20 billion to taxpayers. Moynihan said he did not feel that the bank was "pressured" by the government. Gifford would not use the word "pressure" but said "it is fairest to say that the government pushed us hard to do this deal."
Republicans pressed Towns to hold another hearing that would include testimony from Treasury Secretary Tim Geithner. In a brief interview after the hearing, Towns indicated that he did not plan to hold further hearings and would not call on Geithner to testify.
"Geithner was definitely" involved in the discussion of government aid to save the deal, Towns said. "But he was not one of the big decision makers here."
