Bank of America's chief executive, Ken Lewis, only agreed to complete the acquisition of Merrill Lynch this year after federal regulators threatened to replace him and his board if BofA balked on the deal, New York's attorney-general said yesterday in a letter to federal officials.

Andrew Cuomo, New York's top regulator, quoted Mr Lewis as saying that in December, when mounting losses at Merrill caused him to reconsider the acquisition, Hank Paulson, US Treasury secretary, warned a busted deal could destabilise the financial system. In a deposition in February, Mr Lewis said Mr Paulson told him that “we feel so strongly that we would remove the board and management” of BofA if it pulled out of the deal. Mr Cuomo's letter described Mr Paulson's remarks as a “threat”.

In an interview with Mr Cuomo's office, the letter said Mr Paulson indicated that he told Mr Lewis “the government either could or would remove the board and management” if BofA scuttled the deal. Mr Paulson said he did so at “the request” of Ben Bernanke, the Fed chairman. Mr Bernanke did not give a deposition, citing bank examiner privilege. The Federal Reserve refused to comment. Mr Paulson quoted Mr Lewis as responding to his comments on management change by saying: “That makes it simple. Let's de-escalate.”