Paulson endures tough day on Hill about BofA, Merrill deal

WASHINGTON -- A congressional hearing Thursday on former Treasury secretary Henry Paulson's hard-nosed efforts to push through Bank of America's takeover of Merrill Lynch turned into a contentious inquisition into the government's emergency measures to rescue the financial system last fall and Paulson's leading role.

Some lawmakers suggested Paulson's handling of the BofA-Merrill deal was emblematic of overzealous government maneuvers last fall to rescue an armada of failing financial giants at the expense of taxpayers and besieged homeowners.

Bank of America CEO Kenneth Lewis and Federal Reserve Chairman Ben Bernanke testified last month.

The hearings come at a pivotal time, with the Obama administration proposing to broaden the Fed's powers to head off future financial crises.

Paulson acknowledged pressuring Lewis last December to complete the planned acquisition of Merrill Lynch, despite Lewis' concerns about Merrill's unexpectedly deep fourth-quarter losses, because of the potential damage to the financial system if Merrill failed as Lehman had in September. The former Treasury secretary said he reminded Lewis that the Federal Reserve, as the bank's regulator, could remove Lewis and the board if the bank backed out of the Merrill merger.