By Ravi Bhatia - Talk Radio News Service Bank of America (BOA) executives, including two members of the bank’s board of directors, testified Tuesday in front of the House Oversight Committee to explain how a private deal between BOA and Merrill Lynch turned into a federal bailout. The $50 billion deal between the two banks occurred in September, 2008 and saved Merrill Lynch from bankruptcy. A January 2009 report of its earnings, however, showed that Merrill Lynch lost $21.5 billion in the fourth quarter of 2008, requiring the government to subsequently provide it with an emergency $15 billion preferred stock investment through the Troubled Asset Relief Program. Committee Chairman Rep. Edolphus Towns (D-N.Y.), claimed during Tuesday's hearing that the government did not force Bank of America to take the bailout. Towns noted that it was former Bank of America Chairman Ken Lewis who asked former Treasury Secretary Hank Paulson on Dec. 17, 2008 to intervene. “That one phone call put everything in motion,” Towns said. “Lewis claimed that he believed Bank of America could back out of the deal with Merrill Lynch based on the Material Adverse Change clause in the merger agreement - the so-called ‘MAC clause.’ [Former Bank of America General Counsel Timothy J.] Mayopoulos was suddenly fired nine days later without explanation and replaced by a senior insider who had not practiced law in years.” Mayopolous testified Tuesday that, “Based on information [that was] already disclosed to shareholders, a reasonable investor would have been on notice that Merrill Lynch might well suffer multi-billion dollar losses in the fourth quarter of 2008.” During his prepared remarks, Mayopolous also denied involvement in Bank of America's approving Merrill Lynch to pay billions of dollars in bonuses to its employees. However, he did advise Steele Alphin, Bank of America’s Chief Administrative Officer, that Merrill Lynch, not Bank of America, should determine year-end bonuses for Merrill Lynch employees. “I also advised Mr. Alphin, however, that it was appropriate for him to make clear to the Chair of Merrill’s Compensation Committee that it would be inappropriate for John Thain, Merrill Lynch’s CEO, to be paid a year-end bonus,” Mayopolous said. “My advice was not legal advice that such a bonus would be illegal, but rather my business judgment as to what would be best for the combined company.” Bank of America’s President of Consumer and Small Business Banking Brian Moynihan said Tuesday he was proud of the role his firm has played in the economy “during this period of economic difficulty,” and that Bank of America's acquisition of Merrill Lynch helped prevent a further financial collapse. “We have extended $759 billion in new credit since we filed our first report in the fourth quarter of 2008,” he said. “That represents almost $17 for every dollar of the $45 billion of taxpayer assistance to the Bank of America.”