Oct. 21 (Bloomberg) -- Bank of America Corp. discussed losses at Merrill Lynch & Co. in early November, more than a month before telling regulators the lender needed U.S. help to complete its takeover, according to documents provided to congressional investigators.

“Read and weep,” Chief Accounting Officer Neil Cotty wrote in a Nov. 5 e-mail to Chief Financial Officer Joe Price that included Merrill’s October financial report. The e-mail, which estimated markdowns and “other larger items” of $5.3 billion, was included in 1,000 pages of documents that Bank of America gave to the House Oversight Committee last week.

The committee is investigating how the lender’s rescue of Merrill Lynch led to a government bailout for Bank of America, the biggest U.S. lender. Chief Executive Officer Kenneth D. Lewis didn’t tell his shareholders about Merrill’s losses before they voted to approve the deal on Dec. 5, and didn’t inform regulators until mid-December that the takeover was in danger.

The bank has said Merrill’s losses didn’t accelerate until after the shareholder vote. Two days later, on Dec. 7, Merrill Corporate Controller Gary Carlin e-mailed the brokerage’s updated November report to Cotty.

“What a disaster,” Carlin wrote. The New York-based brokerage’s fourth-quarter loss eventually swelled to $15.8 billion.

Copies of the e-mails were provided to Bloomberg by a person close to the panel, who declined to be identified because the documents from the Charlotte, North Carolina-based bank haven’t been released. The documents being examined by the committee include e-mail correspondence among company officials and board members, memos tied to discussions with regulators and handwritten notes.

Hearing Delayed

Jenny Rosenberg, spokeswoman for the House Oversight Committee, declined to comment. The panel is led by Edolphus Towns, a New York Democrat. An Oct. 22 hearing at which former General Counsel Timothy Mayopoulos and Federal Deposit Insurance Corp. Chairman Sheila Bair were to appear has been postponed until next week, Rosenberg said.

“The strategic wisdom of the Bank of America-Merrill Lynch deal is now obvious to everyone,” bank spokesman Lawrence Di Rita said yesterday. “These documents and e-mails reveal the good-faith deliberations among those who understood that first.”

Lewis, 62, has said that while the bank was aware Merrill was accumulating losses, they didn’t balloon until after the shareholders had already voted.

Tracking Losses

“In mid-December, the forecast losses accelerated dramatically,” Lewis testified to the committee on June 11. “It wasn’t that we didn’t know about losses. The concern was the fact that these losses accelerated.”

Merrill Lynch never withheld information from Bank of America about its worsening fourth-quarter finances, former CEO John Thain said in a Jan. 25 e-mail to Merrill employees. “We were completely transparent with Bank of America. They learned about those losses when we did,” said Thain, who was ousted at Bank of America on Jan. 22. The bank had “daily access” to Merrill’s profit and loss statement, holding and markdowns, said the e-mail, which was included in documents sent to the committee.

Merrill, the world’s biggest broker at the time, agreed in September to be acquired after more than $50 billion of losses and writedowns tied to the collapse of the subprime-mortgage market. Bank of America struck the agreement the same weekend that Lehman Brothers Holdings Inc. collapsed.

The U.S. provided $20 billion in fresh capital and a $118 billion backstop on loans and mortgage-based securities to shore up the Merrill takeover. Public disclosure of Merrill’s losses came on Jan. 16 when the bank announced its first quarterly loss in 17 years and the U.S. aid package.

To contact the reporter on this story: David Mildenberg at dmildenberg@bloomberg.net

Last Updated: October 21, 2009 09:23 EDT