Updated from Thursday, April 23

With less than a week to go before Bank of America's ( BAC) shareholder meeting, it should come as little surprise that someone is trying to redirect blame for the Merrill Lynch deal from Chairman and CEO Ken Lewis, whose job and reputation are on the line.

Several shareholder groups are rallying for board and management changes at BofA in light of Merrill's deteriorating loan portfolio. The extent of that deterioration was not disclosed before the acquisition was finalized at year-end, despite evidence that BofA knew exactly what it was getting into.

Losses from Merrill's toxic assets topped $15 billion in the fourth quarter, and led to the government injecting another $20 billion into BofA. The additional funding called BofA's health into question and gave the feds a greater stake in the company, effectively sending Bank of America's reputation -- and share performance -- down with weaker competitors like Citigroup ( C) for a while.

On Monday, BofA said it held nearly $70 billion in "key capital-markets risk exposures" like super-senior collateralized debt obligations, or CDOs, and credit default swaps, or CDS, at March 31. It set aside another $13.4 billion for near-term credit losses for the combined company.

Needless to say, shareholders are angry.

Some investors argue that Lewis put BofA at undue risk by agreeing to the Merrill deal and going forward with it when troubles became apparent. By not informing shareholders of the escalating losses, they say, Lewis and the board did not uphold their duty to protect shareholder interest.

A story in Thursday's Wall Street Journal, based on a transcript of sealed testimony provided by an undisclosed source, attributed the blame to regulators. Lewis testified before lawmakers under oath that then-Treasury Secretary Henry Paulson threatened to replace him and the board with fresh managers who would seal the deal if he tried to walk away.

When New York Attorney General Andrew Cuomo asked Lewis whether he should have disclosed more information to shareholders about Merrill's impending losses, he said, simply: "It wasn't up to me." Cuomo is urging federal regulators to probe the pressure allegedly applied by Bernanke and Paulson, according to the Journal on Friday.

Both Paulson and Federal Reserve Chairman Ben Bernanke told Lewis that completing the deal was necessary to prevent a possible collapse of the financial system, according to the transcript. But Lewis also acknowledged that the decision was preventing systemic risk -- and catastrophic losses across the system -- at the expense of BofA, at least "over the short term."

In an appearance on CNBC at the time, Lewis said he understood Paulson's and Bernanke's position, because if the financial system collapsed, BofA shareholders would suffer as well.

"What's good for America is good for Bank of America," Lewis said.

He added that self-interest and preserving his job did not lead to the Merrill decision ("I promise you, that was not a factor in this") and that he "reflected on it and agreed this was the right thing to do."

Professor Steve Wyatt of Miami University's Farmer School of Business supports that notion.

Wyatt says that if Lewis had been forthcoming about the impending losses, and his conversations with regulators, or had walked away from the deal and allowed the government to replace management, it could have caused a run on the bank. With balance sheets of over $1 trillion apiece, he says, the risk of such an occurrence at BofA, Citi, Wells Fargo ( WFC) or JPMorgan Chase ( JPM) creates a systemic risk in and of itself.

"I don't think he had much choice," says Wyatt. "They were putting a gun to his head -- there's no question about it.But once you get the federal government involved in the banking system, it raises the question of, 'In whose interest do these people have to run their companies?' "

Of course, many shareholders have a different answer for that than regulators apparently did. Organizations like CtW Investment Group, which represents pension funds and other large investors, as well as high-profile leaders of the investment firm Finger Interests Number One, have been campaigning heavily for Lewis' ouster.

Major pension fund manager TIAA-CREF also plans to vote against him, and two large pension funds in California have gone a step further by filing suit.

Jonathan Finger calls the most recent disclosure about regulatory pressure just "icing on the cake." It doesn't change the fact that Lewis knew -- or could have known -- how poorly Merrill was failing in the weeks leading up to the deal's closing.

Pressure from Bernanke and Paulson didn't relieve Lewis and the board of their fiduciary duties, Finger says, nor does he believe that they were pressured to "break securities laws," as he implies they did. He considers Lewis and the board weak for caving to lawmaker demands without renegotiating terms, or insisting that shareholders be better protected.

"I think he totally wilted," Finger says.

On Wednesday, April 29, Finger and other activist shareholders will have their opportunity to confront Lewis and the board head-on at BofA's annual shareholder meeting in Charlotte, N.C., where the bank is based. And every shareholder will have his say.

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