Former Treasury Secretary Henry Paulson plans to tell lawmakers he acted appropriately in warning Bank of America chief executive Kenneth Lewis that the firm's management could be ousted if it walked away from its deal to buy Merrill Lynch, saying such a move would have suggested a "colossal lack of judgement".

Paulson, in remarks prepared for an appearance before a House panel tomorrow, said that Bank of America had no legal basis to nix the Merrill deal in the wake of rising losses at the investment bank last December. Any attempt to cancel the merger would have threatened the viability of both Bank of America and Merrill, as well as the broader financial system, Paulson said.