By Jonathan Stempel

In a memo to Merrill employees, Thain also said he plans to reimburse Bank of America for $1.2 million spent to renovate his office a year ago, including $35,115 reportedly spent on commode and $1,405 reportedly paid for a trash can. He called the expenses "a mistake in the light of the world we live in today."

Thain was ousted as Bank of America's head of global banking, securities and wealth management on January 22, the same day the renovation expenses were disclosed, and just three weeks after the $19.4 billion merger closed.

The memo was posted on CNBC television's website. Bank of America spokesman Scott Silvestri declined to discuss the memo or the renovations. Merrill representatives did not return several requests for comment.

Thain's insistence that Bank of America knew the extent of Merrill's condition puts added pressure on Bank of America CEO Kenneth Lewis, who has been criticized over the Charlotte, North Carolina-based bank's falling share price. This has increased speculation about his future as chairman and CEO.

Bank of America has been hit with several lawsuits over its failure in December to disclose Merrill's losses and talks with the U.S. Treasury Department, which led to a $20 billion capital infusion from the government.

The bank said on January 16 that Merrill lost $15.31 billion in the fourth quarter, and has said it is cutting as many as 35,000 jobs. Shares were down 82 percent from September 15, when the merger was announced, through Friday.

Bank of America's board of directors is scheduled to hold a regular meeting on Wednesday. The bank has declined to discuss Lewis' job status.

In the memo, Thain said Merrill's fourth-quarter losses stemmed almost entirely from positions taken by his predecessor, Stanley O'Neal, who was ousted in October 2007.

"We were completely transparent with Bank of America," Thain said. "They learned about these losses when we did."

Thain said the bonuses fell 41 percent from 2007 and their size, composition and timing "were all determined together with Bank of America." Merrill awarded the bonuses a few days before the merger closed, much earlier than in past years.

Silvestri downplayed the bank's role in setting discretionary Merrill bonuses.

"John Thain and the Merrill Lynch compensation committee made the decision on the amount and timing of year-end compensation," he said. "We had no legal right to challenge it."

In afternoon trading, Bank of America shares were down 4 cents at $6.20, after earlier rising as high as $6.98.

(Reporting by Jonathan Stempel; editing by John Wallace and Jeffrey Benkoe)