Ken Lewis says he didn't know Merrill would lose $27 billion. He should have.

For more than six months now, Bank of America (BAC) chief Ken Lewis has tried mightily to explain how Merrill Lynch paid out $3.6 billion in bonuses after the biggest loss in Wall Street history—and still each week the questions and investigations multiply. In every conceivable way, Lewis has tried to paint himself as a stunned bystander, as surprised as anyone at the awful turn of events at the investment bank he bought for $50 billion. The irony here is that the ignorance Lewis is shielding himself with is every bit as bad as the charges he's trying to deny.

Let's recap the history. Last September, after the failure of Lehman Bros., Merrill Lynch seemed to be teetering on the brink of insolvency. Bank of America swooped in with its $50 billion bid. The purchase likely kept Merrill afloat and forestalled what could well have been yet another emergency federal bailout. It also, as it happens, let Bank of America chief Ken Lewis buy a top Wall Street firm and complete his age-old goal of creating a giant soup-to-nuts megabank.

Merrill chief executive John Thain took Lewis' money and then, just before the deal closed, paid $3.6 billion in bonuses. Lewis, purporting to be shocked by Merrill's $27.6 billion in losses, ostentatiously fired Thain. Along the way, Lewis claimed that he just really had no say on those bonuses, paid out all of three days before Bank of America officially took over Merrill. This turned out to be a fib.

With the $50 billion that he paid for Merrill now looking absurd, Lewis has continued to maintain that he had no idea that Merrill's loss would be as big as it was when he signed the deal in September. Hoping to twist out of this public relations fiasco, Lewis tried to shift blame, saying that when he saw Merrill's, he considered scrapping the deal but was coerced into going though with it by Hank Paulson's Treasury Department and Fed Chairman Ben Bernanke.

The Merrill bonuses, paid with the help of government funds to employees of an investment bank that some of those same employees had run into the ground, have become—justifiably—a cause célèbre of the post-crash fallout. Paying out huge bonuses just before posting the biggest loss in Wall Street history represents everything that's wrong with a system in which bankers on and off Wall Street pay one another millions of dollars no matter how badly they do.

Did Lewis know about how big Merrill's losses would be? He sure seems to have had a pretty good idea by the time the bonuses were paid, last Dec. 29 (remember—he certainly knew enough to talk about backing out of the deal). But what he saw back in September, when he signed the deal to buy Merrill, is less clear. Lewis very well might not have anticipated the enormous Merrill loss. If he had, he would probably have negotiated a better deal.