New York - The Federal Reserve and the Treasury Department put considerable pressure on Bank of America to go through with its proposed merger with Merrill Lynch as the global financial system teetered in the final months of 2008, according to documents released today by New York State Attorney General Andrew Cuomo.

    Ken Lewis, the head of Bank of America, which has received billions in taxpayer funds, told board members in a Dec. 22 meeting - eight days before the transaction was to close - that Fed and Treasury officials had informed him the board of directors and management of the bank he had presided over for years would be removed, according to minutes of the board meeting.

    "The Treasury and Fed are unified in their view that the failure of the Corporation to complete the acquisition of Merrill Lynch would result in systemic risk to the financial system," the minutes read.

    Lewis told the board that Fed Chairman Ben S. Bernanke had said he had spoken with various other federal regulators, including incoming Treasury officials of the Obama administration, and that all parties had pledged their commitment to provide additional government funds to help Bank of America absorb losses on certain Merrill Lynch assets.

    Weeks after the transaction closed on Jan. 1 of this year, Bank of America reported a $15 billion loss, and received $20 billion in government funds on top of the $25 billion it had already received.

    Bank of America has been under investigation by Cuomo's office over whether it misled shareholders, who voted to approve the merger, about the health of Merrill Lynch as well as bonuses to Merrill Lynch executives that were paid out in December, ahead of the usual schedule.

    In a letter today to Securities and Exchange Chairwoman Mary Schapiro and top congressional leaders, Cuomo raised questions about the transparency of the government TARP program to stabilize the financial system as well as Bank of America's "corporate governance and disclosure practices."

    Bank of America entered into an agreement to buy Merrill in September, as the global financial system sank in turmoil over the failure of Lehman Brothers.

    According to Cuomo, after learning on Dec. 14 of "staggering amount of deterioration" at Merrill Lynch, Lewis conferred with counsel to determine if his bank could rescind the merger agreement by using a clause that allows companies to exit deals if a "material adverse event" has occurred. On Dec. 17, Lewis informed then-Treasury Secretary Henry M. Paulson Jr. that the bank was seriously considering invoking the clause.

    During meetings that followed, according to Cuomo's letter, federal officials pressured Bank of America not to seek to go through with the merger.

    On Dec. 21, after Lewis told Paulson the bank still wanted to exit the merger, Paulson told Lewis its management and board would be replaced if the bank were to invoke the material event clause.

    Secretary Paulson's threat swayed Lewis, Cuomo said in the letter.

    "According to Secretary Paulson, after he stated that the management and the Board could be removed, Lewis replied, 'that makes it simple. Let's deescalate,'" the letter states. "Lewis admits that Secretary Paulson's threat changed his mind about ... terminating the deal."

    Cuomo said Paulson has told him he made the threat at the request of Bernanke.