Jun 25, 2009, 16:14 GMT
Washington - Federal Reserve Chairman Ben Bernanke on Thursday said the US government acted with the 'highest integrity' in brokering a controversial deal that allowed Bank of America to acquire investment bank Merrill Lynch.
In testimony before the US Congress, Bernanke insisted the US central bank did not threaten executives of Bank of America if they backed out of the deal. The merger's collapse was a real possibility in December that could have plunged the US financial system back into crisis.
'The decision to go forward with the merger rightly remained in the hands of the Bank of America's board and management,' Bernanke told the Committee on Oversight and Government Reform of the House of Representatives.
But he acknowledged the government warned Bank of America that it could trigger a 'broader systemic crisis' if the deal fell through. In the end, the US Treasury loaned Bank of America 20 billion dollars to help it complete the merger.
'I believe 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 said.
Bank of America first agreed to acquire Merrill Lynch in September, as the collapse of Lehman Brothers and near collapse of American International Group (AIG) nearly brought the whole of Wall Street to its knees.
But Bank of America in December told the government it was reconsidering the deal as its own financial situation deteriorated. Lawmakers have questioned whether Bernanke and the US Treasury forced Bank of America to accept a deal it could not afford.
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