Government regulators threatened to remove top Bank of America executives if they backed out of a buyout of failing brokerage giant Merrill Lynch, and offered to provide taxpayer funds to compensate for Merrill's poor performance, according to company records obtained by The Washington Times.

The documents -- e-mails between bank executives and their outside attorneys as well as board meeting "talking points" prepared for then-Bank of America Chief Executive Ken Lewis -- offer new insight into the hardball tactics that produced one of the biggest deals negotiated during the late 2008 global financial crisis, one that is still reverberating on Wall Street and in Washington.

They also underscore the fear shared by then-Treasury Secretary Henry M. Paulson Jr. and Federal Reserve Board Chairman Ben S. Bernanke that allowing the deal to fall through would mean a sequel to the collapse of Lehman Brothers, whose failure months earlier sent the world economy into a tailspin.

"It's highly unusual for a government agency - let alone a Treasury secretary and a Fed official - to virtually order a company to do something like this under threat of removal,"said Cornelius Hurley, director of the Morin Center for Banking and Financial Law at the Boston University School of Law. "It raises a fascinating question which is, if you're Bank of America and you have a shareholder's interests paramount in your mind, what is your liability if you go against those interests in the interests of the country?"

Summaries written by the bank executives of their conversations with Bernanke and Paulson also appear to show that incoming Treasury Secretary Timothy F. Geithner agreed with the deal, which some lawmakers say raises questions over congressional testimony given by Bernanke this summer in which he said Geithner was not involved in the discussions.

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