Did Federal Reserve Chairman Ben Bernanke unlawfully railroad Bank of America (NYSE: BAC) into buying Merrill Lynch? Some say yes and now point to documents subpoenaed by the House Oversight and Government Reform Committee as evidence.  

But I'm still not buying it. Not one tiny bit. Let me explain.           

The documents, cited in a Republican staff memo, contain an e-mail from Richmond Federal Reserve president Jeffrey Lacker chatting about B of A's intention to bag the Merrill Lynch deal after discovering that its books were filled with explosives. Responding to Ken Lewis's intent to use a "material adverse change" (MAC) clause -- a legal claim that lets deals fall apart amid unforeseen events -- Lacker states:

Just had a long talk with Ben [Bernanke] ... Says they think the MAC threat is irrelevant because it's not credible. Also intends to make it even more clear that if they play that card and they need assistance, management is gone.

In the House Republican memo, it's claimed that there was "a gun placed to the head of Bank of America to go through with the merger," and that "Government officials crossed the line by applying inappropriate pressure on a private institution to go through with a business deal."

Maybe you see it this way, too. I don't blame you. But let's get a few things straight.

First, Bernanke's apparent claim that B of A's material adverse clause was irrelevant seems correct. As I showed in April, tucked into the B of A/Merrill merger agreement is a list of things that do not justify a MAC, including:

general business, economic or market conditions, including changes generally in prevailing interest rates, currency exchange rates, credit markets and price levels or trading volumes in the United States or foreign securities markets, in each case generally affecting the industries in which such party or its Subsidiaries operate and including changes to any previously correctly applied asset marks resulting therefrom

This essentially says, "Look, if markets and the economy hit the fan, that's your problem. It's not grounds to walk away from the deal."

Second, the argument that B of A was forced to close the deal falls flat. Nowhere does any report, quote, or subpoenaed document show the Fed forced the deal shut. What it shows is that it was willing to remove Ken Lewis if he walked away from a deal he was legally obligated to close. "Holding you accountable for screwing up" is far different than "Holding a gun to your head." All the Fed did was say, "Look, if you force us to clean up your mess, we're going to ask you to leave."

I understand the gnashing of teeth surrounding this tragedy is a tired dispute. But this goes far beyond Wall Street gossip: It's the topic of holding CEOs accountable for incredibly brazen moves that leave shareholders -- and taxpayers -- reeling. There's a reason the CEOs of Wells Fargo (NYSE: WFC) and JPMorgan Chase (NYSE: JPM) aren't in the middle of this: It's because they didn't haphazardly risk the wealth of their shareholders on radioactive mergers and then try to weasel their way out. Even when things didn't go as planned, they stuck to their word. Is Ken Lewis a victim of an overpowering Fed chief, or did he orchestrate the worst deal in banking history, upchuck most of the losses onto taxpayers, and still manage to keep his job? Answer that question honestly, and I think you'll see where Bernanke was coming from.

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