Days before Bank of America shareholders approved the bank’s $50 billion purchase of Merrill Lynch in December 2008, top bank executives were advised that losses at the investment firm would most likely hammer the combined companies' earnings in the years to come, the New York Times reported today. But shareholders were not told about the looming losses, which would prompt a second taxpayer bailout of $20 billion, leaving them instead to rely on rosier projections from the bank that the deal would make money relatively soon after it was completed. What Bank of America's top executives, including its chief executive then, Kenneth D. Lewis, knew about Merrill's vast mortgage losses and when they knew it emerged in court documents filed yesterday in a shareholder lawsuit being heard in Federal District Court in Manhattan. The filing in the shareholder suit included sworn testimony from Lewis in which he concedes that before Bank of America stockholders voted to approve the deal he had received loss estimates relating to the Merrill deal that were far greater than reflected in the figures that had appeared in the proxy documents filed with regulators.
