PREVIEW-For Bank of America CEO, the fun may be over

* Lewis pressured to give up chairman, CEO jobs

* Merrill merger, disclosures criticized

* Annual meeting April 29

By Jonathan Stempel

NEW YORK, April 26 (Reuters) - In an interview three years ago, Bank of America Corp Chairman and Chief Executive Kenneth Lewis mused that he would retire by the time he turned 65. By then, he figured, "I will have had all the fun I can stand."

Shareholders will decide this week whether for Lewis, 62, the fun should end now.

There is perhaps no U.S. banking executive more closely associated with the financial sector meltdown and who still has his job than Lewis, the chief executive of Bank of America (BAC.N) since 2001 and the chairman for most of that period.

But the bank is on the hook for $45 billion of taxpayer money -- $147 per American. Its shares trade around $9 each.

Shareholders, politicians and regulators led by New York Attorney General Andrew Cuomo have attacked the bank's handling of the takeover of Merrill Lynch & Co.

When the largest U.S. bank by assets holds its annual meeting in its Charlotte, North Carolina, hometown on Wednesday, shareholders may vote for it to name an independent director to replace Lewis as chairman. Investors, including the pension fund manager TIAA-CREF, have come out in favor of this change.

But if shareholders go further and deny Lewis a seat on his own board, his future as chief executive may be short.

"If Lewis is deprived of the chairmanship, the board would at least keep a much tighter rein on Lewis," said Lawrence Mitchell, a law professor at George Washington University. "If shareholders voted Lewis off the board, it would seem to me that board would be well advised to fire Lewis."

Bank of America made money in the first quarter, but many analysts believe it needs more capital, or will be ordered by the Treasury Department to find it -- perhaps by converting some of the government's preferred stock into common stock.

Loan losses are rising, especially from credit cards; Lewis bought card issuer MBNA Corp in 2006. And the bank inherited many lawsuits and troubled home loans when Lewis bought the mortgage lender Countrywide Financial Corp last July.

COZY RELATIONSHIP

In response to more than 20 written questions posed by Reuters about Lewis, Merrill and the board, Bank of America expressed confidence in Lewis' leadership and in its 18 directors, all of whom it said should be re-elected.

"Bank of America is gratified at the support it has received from both large and small investors for the positions expressed by its board," spokesman Robert Stickler said. "The board of directors is 100 percent behind Ken Lewis."

That's part of the problem, some critics say. Many point to O. Temple Sloan, the lead director and a board member since 1996, as not effectively checking on Lewis' actions. He could end up becoming chairman assuming he keeps his own board seat.

"Shareholders should hold the board responsible," according to Richard Davet, 64, a shareholder who said he works in jewelry manufacturing, has long faulted the bank over mortgages and governance, and began attending the bank's annual meetings in 1996. "There is too cozy a relationship on the board."

Eight of the 11 proposals on the meeting ballot are from shareholders, on issues such as executive pay and credit card lending. Proposal 8, from the Service Employees International Union, seeks to split the chairman and chief executive roles. Proposal 1, from the bank, concerns the election of directors.

Most large U.S. banks install one person to handle both the CEO and chairman roles. Citigroup Inc (C.N) and Wells Fargo & Co (WFC.N) are the two most prominent current exceptions.

"They are demanding jobs and require different skills, and having an independent chair will provide better oversight of management," said Beth Young, senior research associate at the Corporate Library, a governance specialist.

In 2008, Wachovia Corp and Washington Mutual Inc WAMUQ.PK stripped their respective chiefs, Ken Thompson and Kerry Killinger, of the chairman job as their finances deteriorated.

Neither would last long thereafter as chief executive. Nor did the banks. Wells Fargo bought Wachovia. Washington Mutual failed, and JPMorgan Chase & Co (JPM.N) bought its bank units.

Bank of America, with $2.32 trillion of assets, is considered too important to the financial system to fail. So is JPMorgan Chase, with $2.08 trillion, but that company is widely considered to be among the most stable big banks.

Critics have long faulted Lewis for moves they believe made Bank of America bigger, but not better.

Lewis agreed to buy Merrill, an investment bank and brokerage, in September after less than 48 hours of talks. That came just 11 months after Lewis said following a bad quarter: "I've had all of the fun I can stand in investment banking."

SEAT ON THE BOARD

But Lewis later attempted to back out of the merger as Merrill was amassing a $15.84 billion fourth-quarter loss. The bank would ultimately get a federal bailout to absorb Merrill.

According to testimony provided by Lewis and released by Cuomo, Federal Reserve Chairman Ben Bernanke and former Treasury Secretary Henry Paulson pressed Lewis to go through with the merger, so as to not derail the financial system.

Cuomo also said Lewis testified that regulators instructed him not to disclose Merrill's losses, an account disputed by representatives of Bernanke and Paulson.

The New York attorney general is also examining Bank of America's role in the awarding of $3.62 billion of bonuses to Merrill employees just before the closing.

Bank of America said it acted "legally and appropriately" with regard to the Merrill merger.

But the U.S. Securities and Exchange Commission last week said it is actively reviewing the bank's disclosures, to see if they complied with securities laws. And thin disclosure could fuel the many investor lawsuits over the merger.

"Disclosure is not a matter of convenience," said James Post, a business policy and law professor at Boston University School of Management. "They deferred to the government, and I would say they went the wrong way. Lewis concealed material information about the Merrill deal and the bonuses."

Mitchell added: "If Lewis thought it was truly in the bank's best interest not to go through with the Merrill deal, he shouldn't have done it. As a legal matter, your job security is irrelevant to the performance of your fiduciary duties."

It is rare for the chief executive of a big company not to sit on its board. That almost happened in 2004 at Walt Disney Co (DIS.N), when about 45 percent of shares were cast against then-Chief Executive Michael Eisner's re-election to the board. Eisner stepped down as chief executive the next year.

Experts said if it happened here, other directors would risk legal liabilities of their own if they retained Lewis, only to then see Bank of America's businesses perform poorly.

"Every once in a while, the CEO will not be a board member, but that is a 1-in-10,000 situation," Young said. "If it happens here it would be suicidal for a board to keep him on."

Analysts believe possible internal replacements for Lewis could include investment bank and wealth management chief Brian Moynihan, and mortgage banking chief Barbara Desoer. (Reporting by Jonathan Stempel; Editing by Tim Dobbyn)