A congressional panel accused Bank of America Corp on Tuesday of knowing about Merrill Lynch's huge losses as early as November 2008, suggesting the bank misled investors in saying it did not grasp the depth of the problems until the following month.

The U.S. House Oversight and Government Reform Committee unveiled internal Bank of America documents they said show the bank was alarmed by the losses far before shareholders of both companies approved the merger last December 5.

Democratic and Republican lawmakers piled criticism on Brian Moynihan, a key figure in putting together the merger and a leading candidate to replace the outgoing Chief Executive Kenneth Lewis, and two bank directors.

Moynihan replaced Timothy Mayopoulos as general counsel on December 10, 2008, nine days after the latter told senior executives that Bank of America had no contractual basis to back out of the merger.

Democrats sympathized with Mayopoulos and hounded other witnesses for the reason for his firing.

I find your testimony troubling, Democratic Rep. Elijah Cummings told Moynihan, Bank of America's general counsel when the merger was closed on January 1 and now its retail banking chief. A seasoned attorney was fired nine days after he gave an opinion.

Mayopoulos told the House committee panel he was stunned to be fired after being promised the same job at the combined company. He is now general counsel for mortgage financier Fannie Mae .

The panel has for months been probing events leading up to the deal's completion on January 1.

It has been trying to pinpoint when the bank knew Merrill was on its way to what would become a $15.8 billion loss and whether Bank of America was prepared to try to stop the merger or seek government help to finish it.

Moynihan said the argument for invoking a material adverse change clause to back out of the merger was clearer later in December, when Merrill appeared to face an $18 billion pretax quarterly loss.

The facts were different by then, he said.

CALM

Washington-based financial services executives have viewed the committee probe as way for lawmakers to score political points and believe Tuesday's hearing could make or break Moynihan's candidacy to replace Lewis.

Moynihan remained calm under questioning, including the circumstances regarding Mayopoulos' dismissal.

In the business world this happens, he said. A decision was made to eliminate 10 percent of the senior executives.

Lawmakers pressed the bank's directors on who might become the next chief executive. Charles Chad Gifford and Thomas May are part of a board committee to find Lewis' replacement.

When Gifford was asked whether Moynihan was a leading candidate, Gifford said Moynihan was a very talented executive at Bank of America. Later Gifford told a reporter the CEO search committee was working as hard as we can to find a replacement for Lewis.

The House panel is also examining the government role in the merger, which led to a $20 billion injection of taxpayer funds on top of $25 billion that Bank of America received earlier.

Committee members previously questioned and faulted Lewis, Federal Reserve Chairman Ben Bernanke and former Treasury Secretary Henry Paulson for their handling of the merger.

Mayopoulos told the committee the only conversation he had with senior Bank of America executives about invoking the material adverse change clause was on December 1.

He said he did not learn Merrill faced a possible $9 billion quarterly loss until December 9, the day before his dismissal and the same day the board of directors was alerted.

Board directors Gifford and May said Mayopoulos was fired because the bank needed a new position for Moynihan, who was planning to leave the company after turning down the job to lead the credit card unit in the new company.

Gifford is the former chief executive at FleetBoston Financial Corp, where he was Moynihan's boss. Bank of America bought FleetBoston in 2004.

He and May said Bank of America is determined to pay back the $45 billion of taxpayer injections.

May added that there has been no determination on how much to pay out in year-end bonuses and that such payouts would be determined in early 2010 based on the bank's performance. Moynihan said taxpayer funds were not being used to pay executive bonuses.

The bank had agreed to pay $33 million to resolve a U.S. Securities and Exchange Commission lawsuit over its lack of disclosure about Merrill bonuses awarded for 2008, but a federal judge rejected the accord. That case is scheduled to go to trial early next year.

Bank of America shares were down less than 1 percent at $15.77 at the close of trading on the New York Stock Exchange. They traded at $33.74 before the merger was announced on September 15, 2008.

(Reporting by Rachelle Younglai, Jonathan Stempel and Kim Dixon; editing by Matthew Lewis and Andre Grenon)

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