Federal Reserve chairman Ben Bernanke, facing fierce criticism over the rescue of investment giant Merrill Lynch, said Thursday the central bank acted "with the highest integrity" on the matter.
Bernanke was summoned to a House of Representatives hearing to explain the Fed's actions in arranging the Bank of America purchase of the Wall Street group, which was in danger of collapse when the extent of Merrill's losses were revealed.
Some lawmakers have said the Fed kept other regulators in the dark about key issues, while others said the central bank and Treasury pressured Bank of America to finalize the deal after it wanted to walk away.
Bernanke told the panel that the Federal Reserve "acted with the highest integrity throughout its discussions with Bank of America regarding that company's acquisition of Merrill Lynch."
Bernanke acknowledged that the deal, announced last September, ran into troubled on December 17, when Bank of America learned of "significant losses" at Merrill Lynch for the fourth quarter and threatened to walk away, citing a "material adverse" clause or MAC.
Bernanke said he "expressed concern that invoking the MAC would entail significant risks, not only for the financial system as a whole but also for Bank of America itself."
But he also denied reports that he had threatened Bank of America and its chief executive Kenneth Lewis.
"I did not tell Bank of America's management that the Federal Reserve would take action against the board or management if they decided to proceed with the MAC," he said in his prepared remarks.
"Moreover, I did not instruct anyone to indicate to Bank of America that the Federal Reserve would take any particular action under those circumstances."
