Former Treasury Secretary Henry Paulson is expected to tell a House committee tomorrow that he did not bully Bank of America Corp. chief executive Ken Lewis into buying Merrill Lynch, according to prepared remarks obtained by the Observer.

“I believe my remarks to Mr. Lewis were appropriate,” Paulson says in his written testimony. “I explained to him that the government was supportive of Bank of America, but that it felt very strongly that if Bank of America exercised the (escape clause in the Merrill deal), such an action would show a colossal lack of judgment and would jeopardize Bank of America, Merrill Lynch, and the financial system.”

Paulson acknowledges that he told Lewis that the Federal Reserve could use its authority to remove management and the board, but he says he did not do so under the direction of Fed Chairman Ben Bernanke. In testimony last month, Bernanke said he did not tell Paulson to threaten Lewis on his behalf, although he, too, opposed use of the escape clause.

“I want to make clear that my words in speaking to Mr. Lewis were my own,” Paulson says. “Chairman Bernanke never asked me to indicate any specific action the Federal Reserve might take.”

Read the complete story at charlotteobserver.com