House panel to subpoena Fed over BofA-Merrill deal

By Kim Dixon

WASHINGTON (Reuters) - A House of Representatives committee on Tuesday said it would subpoena the Federal Reserve to force the central bank to surrender documents regarding its role in Bank of America's takeover of Merrill Lynch last year.

The subpoena comes two days before Bank of America Chief Executive Ken Lewis is set to testify before the House Oversight Committee, which is probing the transaction, what Lewis knew about Merrill's financial condition and potential regulatory pressure to complete the deal.

Lewis, in testimony prepared for the hearing, said he became aware of "significant, accelerating losses" at Merrill in mid-December after the shareholder vote. Lewis has consistently maintained in statements that he did not realize the severity of Merrill's problems until after that vote.

The CEO, who has since been ousted as chairman, also said he told Treasury and Fed officials he was considering declaring a "material adverse change" which would have allowed it to walk away from the acquisition.

"Treasury and Federal Reserve representatives asked us to delay any such action, and expressed significant concerns about the systemic consequences," Lewis said in the testimony.

Fed chairman Ben Bernanke has denied previous assertions by Lewis about pressure. A spokeswoman for former Treasury Secretary Henry Paulson has said Paulson told Lewis there was no need to terminate the deal.

Chairman Edolphus Towns was joined by the ranking Republican Darrell Issa in agreeing to serve the subpoena on the Federal Reserve.

The lawmakers said the Fed would only allow committee staff to review documents at the Federal Reserve's Washington offices, which they did for several days, according to a letter dated June 3 to Fed chairman Ben Bernanke.