Former US Treasury Secretary Henry Paulson admitted on Thursday that he threatened Bank of America to acquire Merrill Lynch in a deal that cost taxpayers US$20 billion.

Paulson acknowledged that he warned the bank's CEO, Kenneth Lewis, that Lewis could lose his job if he dropped the deal, according to Paulson's prepared testimony sent to a US House panel.

"I believe my remarks to Mr. Lewis were appropriate," Paulson said, adding dropping the deal would be harmful to both parties and the greater economy.

"I further explained to him that, under such circumstances, the Federal Reserve could exercise its authority to remove management and the board of Bank of America," said Paulson.

Lewis said earlier that he was reluctant to go through with the deal because Merrill was in tough financial situation, but the government was against it.

According to local media, Federal Reserve Chairman Ben Bernanke once hinted that Lewis and other high rank executives would be ousted from the bank if they did not accept the deal.

But Bernanke said no member of the Fed urged Bank of America to keep quiet about Merrill Lynch's financial problems.

The deal that BoA took over Merrill was part of a series of big deals led by the government after the breakout of the financial crisis last year. BoA was in trouble after Merrill disclosing in heavy loss. The role that the US government played in the deal was controversial.

(Xinhua News Agency July 17, 2009)