The Financial Times' Sunday reports say that in the contentious decision by Merrill Lynch - that of paying $4 billion in bonuses in December - after it suffered $15 billion in losses, Bank of America (BofA) too had played a part.

According to Bank of America, the payment of compensation was sanctioned by John Thain, Merrill's chief executive who was shown the door last week.

Reports indicate that Thain had at least two conversations with J. Steele Alphin, Bank of America's chief administrative officer, before the board meeting on December 8, at which Merrill's bonus payments met with an approval.

The Financial Times said that BofA had confirmed that there had been conversations about the bonus payments before the payouts. Saying that Merrill was an independent company until the deal closed on January 1, the bank said: "We never said we didn't talk with them about it. But, in the end, it was their decision and they informed us of it."

Tension between Thain and Ken Lewis, the CEO of BofA, starting building up after BofA came to know in December that fourth-quarter losses at Merrill would be much worse than expected. This made BofA almost decide to walk out of the deal, but the federal government undertook to help BofA absorb the hit!