Bernanke says Fed acted above board

WASHINGTON, June 25 (UPI) -- U.S. Federal Reserve Chairman Ben Bernanke said the central bank acted with integrity in guiding the sale of Merrill Lynch & Co.

"I believe that the Federal Reserve acted with the highest integrity throughout its discussions with Bank of America," Bernanke told members of the House Committee on Oversight and Government Reform.

The bank has come under criticism after Bank of America Chief Executive Officer Kenneth Lewis suggested top regulators pushed the deal through last winter by threatening jobs and advising him to keep Merrill Lynch losses a secret from shareholders.

In a prepared statement, Bernanke said, "I did not play a role in arranging this transaction and no Federal Reserve assistance was promised or provided in connection with that agreement."

When Lewis threatened to pull back from the purchase on Dec. 17, Bernanke said he "expressed concerns" about the bank's credibility and the possibility of "a broader systemic crisis."

The $20 billion rescue package for Bank of America after the deal was struck was made "to reduce the risk of market disruption," Bernanke said.

"I did not tell Bank of America's management that the Federal Reserve would take action against the board or management," if they decided against making the deal, he said.