Uncle Sam appears to have gone from matchmaker to Godfather.

Witness the perplexing tale of Bank of America and Merrill Lynch. The merger shows the rule of law becoming a rule of awe, with top government officials apparently fiddling with corporate transparency that is essential to a functioning market.

The action reached a climax in mid-December, when Bank of America Chief Executive Kenneth Lewis scrambled to handle billions in unexpected losses from the Merrill deal. He rushed to see Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke. In a Dec. 17 meeting, Messrs. Paulson and Bernanke suggested it was in BofA's own interest, and also the nation's, to stay the course. They ultimately offered Mr. Lewis a $138 billion package of taxpayer-funded incentives not to scrap the deal.

Mr. Lewis kept his mouth shut. The deal closed Jan. 1, valued at $24 billion. Last week, the bank came clean. In the past five trading days, Bank of America's market capitalization has dropped 45%, wiping away a sum greater than the Merrill transaction itself.

Much criticism has been heaped on Mr. Lewis for failing to disclose the loss once it was revealed, soon after the Dec. 5 shareholder vote. Had they known of the problems, shareholders might have pressed to recut or kill it before it closed. "It's extremely disappointing," said Bill Shaw, who holds 300,000 BofA shares at Mavrix Fund Management in Toronto.