OMAHA, Neb., May 2 (Reuters) - Charlie Munger, the vice chairman of Berkshire Hathaway Inc (BRKa.N: Quote, Profile, Research) (BRKb.N: Quote, Profile, Research), on Saturday defended Bank of America Corp (BAC.N: Quote, Profile, Research) Chief Executive Kenneth Lewis' decision to complete the acquisition of Merrill Lynch & Co, and not to disclose Merrill's mounting losses before the merger closed.

Lewis had threatened to back out of the merger after shareholders voted to approve it, once it became apparent that Merrill's fourth-quarter losses, which would reach $15.84 billion, were soaring.

According to testimony released by New York Attorney General Andrew Cuomo, Lewis felt he was under pressure from Federal Reserve Chairman Ben Bernanke and former Treasury Secretary Henry Paulson to complete the merger, so as to not upset the financial system. The merger valued Merrill at about $29.1 billion of common and preferred stock.

"You can criticize the original decision of the Bank of America to buy Merrill Lynch, and the contract they signed, and that criticism was legitimate," Munger said at Berkshire's annual meeting. "I think the Treasury people behaved honorably and intelligently, and so did Bank of America."

Warren Buffett, who runs Berkshire, said "we were dealing with a fragile situation," and that if Bank of America backed away, Merrill might have suffered a similar fate to Lehman Brothers Holdings Inc (LEHMQ.PK: Quote, Profile, Research), which went bankrupt.

"I could see why Hank (Paulson) and Bernanke would want to put a lot of pressure on a guy not to have the thing blow up," even as Lewis was getting "material facts" about Merrill's health, he said.

Bank of America faces regulatory probes and a slew of lawsuits over the merger, which led to a federal bailout including $20 billion of new capital in January.

On Wednesday, Bank of America shareholders voted to oust Lewis as chairman of the largest U.S. bank. Analysts and governance experts said the move could be a precursor to his eventually giving up the chief executive role, which he has held since 2001. (Reporting by Jonathan Stempel and Lilla Zuill)