Bernanke denies threatening BoA, withholding info on Merrill deal

Federal Reserve Chairman Ben Bernanke denied Thursday that he acted in a way to force Bank of America (BoA) to take over the troubled Merrill Lynch, maintaining he only advised BoA of the possible effects of the deal.

“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,” Bernanke said in testimony before the House Oversight and Government Reform Committee.

Bernanke referred to BoA’s last-minute worries about the Merrill deal, in which the former threatened to invoke the “Material Adverse Event Clause” (MAC) to nix a final deal after Merrill incurred heavy losses in the 4th quarter of 2008.

“Moreover, I did not instruct anyone to indicate to Bank of America that the Federal Reserve would take any particular action under those circumstances,” Bernanke added.

Bernanke’s leadership at the Fed has come under fire from congressional Republicans, who have accused the Fed of having inappropriately acted to force the BoA-Merrill deal.

Rep. Darrell Issa (R-Calif.), the ranking member of the Oversight Committee, alleged Wednesday that Bernanke had orchestrated a “cover-up” by deliberately withholding information about the merger from shareholders and federal regulators.

Bernanke also denied the “cover-up” allegation in his prepared testimony on Thursday.

“Neither I nor any member of the Federal Reserve ever directed, instructed, or advised Bank of America to withhold from public disclosure any information relating to Merrill Lynch, including its losses, compensation packages or bonuses, or any other related matter,” he said.

Read Bernanke’s entire prepared remarks here.