The office of New York Attorney General Eric Schneiderman admits he will not seek damages from Bank of America (BAC) over its risky $18.5 billion purchase of Merrill Lynch back in 2009.

The purchase has been a thorn in Bank of America’s side for years, with the NY AG and investors publicly asking how much BofA executives knew about Merrill Lynch’s losses at the time, especially since they caved into a deal that created more litigation risk for BofA in the midst of the mortgage-market meltdown.  

Reuters reported last week that Schneiderman is content not to seek damages in the BofA-Merrill Lynch case over whether the merger failed to appropriately advise investors. This is certainly a reprieve for litigation-prone BofA.

But the bank’s former executives are not getting such an easy pass. The same article from Reuters says Schneiderman wants to bar the bank’s former CEO Kenneth Kewis and its former CFO Joe Price from the securities industry, while also barring them from serving on the boards of public companies.

Yet, the debate over why BofA stumbled into such a perceived bad bet as Merrill Lynch has taken many twists and turns over the years. Oddly enough, the role of government officials who played a game of chess with bank mergers and acquisitions during the financial crisis has yet to receive a decent, consistent probe.

Most notably, back in 2011, depositions surfaced in a BofA-Merrill Lynch court case in which former BofA executive Ken Lewis admitted at one point he grew concerned about how much money Merrill Lynch was bleeding right before the transaction took place.

However, court depositions have suggested strong encouragement came from the Federal Reserve and Treasury for BofA executives to move on the deal.

As highlighted in one deposition that surfaced on HousingWire back in 2011, former BofA CEO Ken Lewis apparently talked about how then Treasury Secretary Hank Paulson called him, offering what could easily be construed as a push to get the deal done without giving investors too much time to breath or share their input.

When asked if government officials had an agreement with BofA to help Merrill Lynch, Lewis said Paulson told him: "First, it would be so watered down, it wouldn’t be as strong as what we were going to say to you verbally, and secondly, this would be a disclosed event and we do not want a disclosable event."

The examiner then asked, "When you say disclosed event, he means a disclosed event for the corporation?" To that, Lewis replied, "Correct — well, yes."

Lewis goes on to say the following in the deposition:

"They did not want, and they didn't think it was in our best interest, to have anything announced until you can announce the whole thing, and the promise was to get it announced before or during that earnings," Lewis said. The interviewer then asked Lewis, "They didn't think it was in the best interest if you announced to your shareholders what you were negotiating?"

Lewis replied, "No. They thought it was in our best interest for the deal to be completed and to be able to say, 'This is what we have, as opposed to prospectively.'"

So as the NY AG lets BofA off on damages, it's clear that as the banks try to maneuver out of litigation mode, the government's role in the crisis continues to play second fiddle in the headlines.