It marked Bernanke's first public comments since the House committee launched an investigation this year into whether he or other government officials bullied Bank of America to stick with its plan to combine the two financial powers after Lewis learned of Merrill's financial woes.
During the three-hour hearing, Bernanke faced skepticism and often-hostile questioning - unusual for a Fed chairman, who typically commands deference in public settings.
Adopting the role of outsider, Republicans in particular have turned aggressive toward Bernanke, trying to link him to the Obama administration as advocates of government meddling in private industry. Many Republicans are suspicious of the administration's plan to expand the Fed's regulatory powers.
It's an odd shift, because Bernanke is a Republican appointee, and many of his key advocates are Democrats. And it comes at a pivotal time: Bernanke's term expires early next year, and President Barack Obama will have to decide whether to pick his own Fed chief or reappoint Bernanke.
Earlier this month, Lewis testified that his job had been threatened after he expressed second thoughts about the deal. Lewis said then-Treasury Secretary Henry Paulson and federal regulators made clear that if Charlotte-N.C.-based Bank of America Corp. reneged on its promise, that he and the bank's board members would be ousted.
But in his testimony to the House Oversight and Government Reform Committee, Bernanke said he never told Bank of America executives that the Fed would punish them or the bank's board if they tried to stop the deal. And he said he never told anyone else to send such a message to the bank.
Rep. Jason Chaffetz, R-Utah, said of Bernanke's denial that he threatened Lewis' job: "With all due respect, I'm just not buying that."
Bernanke also said no member of the Fed urged Bank of America to keep quiet about Merrill Lynch's financial problems.
"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," the Fed chief said.
The committee's ranking member Darrell Issa, R-Calif., accused the Fed of having "deliberately kept other regulators in the dark regarding the negotiations with Bank of America. The Federal Reserve's cover-up of important information and willingness to exclude key regulatory partners" such as the Securities and Exchange Commission and the Office of the Comptroller of the Currency "raises troubling questions," Issa said.
But Rep. Dennis Kucinich, D-Ohio, said he thought Lewis was the one pressuring the government. He said the investigation revealed that Fed officials thought Bank of America failed to do proper due diligence when it came to Merrill Lynch.
When asked about Bank of America's management, Bernanke said: "I did have concerns, yes."
Rep. Paul Kanjorski, D-Pa., said he didn't know why the panel was conducting the hearing, noting the financial peril the country faced last fall.
Bank of America received $45 billion from the government's financial bailout program, $20 billion of which was linked to its acquisition of New York-based Merrill Lynch.
"We don't have full sunshine yet," committee chairman Rep. Edolphus Towns, D-N.Y., said at the end of the hearing. He noted "significant inconsistencies" between the testimonies of Bernanke and Lewis.
"It is still unclear whether Bank of America was forced to go through with the Merrill Lynch deal," Towns said.
As part of the panel's continuing investigation, Towns said Paulson agreed to appear before the committee in July.
Bernanke defended the deal and government bailout, saying the action was needed to avoid another blow to the financial system, which at the time was in distress.
If Bank of America had decided to abandon the deal, it "might have triggered a broader systemic crisis that could well have destabilized Bank of America as well as Merrill Lynch," Bernanke said.
Invoking the clause to rescind the deal also would have "cast doubt in the minds of financial market participants - including the investors, creditors and customers of Bank of America - about the due diligence and analysis done by the company" and the judgment of its management, Bernanke added.
Bernanke also said the Fed's lawyers believed it was "highly unlikely" that Bank of America would be successful in terminating the deal through the special clause. The "best option," therefore, for the companies and the broader financial system was to work with the Fed and the Treasury Department to develop a contingency plan to ensure that Bank of America would remain stable should the completion of the acquisition and the announcement of losses lead to financial stress, he said.
The government helped orchestrate the deal at a time when the country's economic and financial landscape was especially fragile. Lending, the lifeblood of the economy, had come to a near halt and the financial system was on the brink of a meltdown.
The transaction was hammered out over the same weekend in September that another investment bank, Lehman Brothers, went under, leading to the biggest corporate bankruptcy in U.S. history and plunging financial markets worldwide into crisis. One day later, the government was forced to bail out teetering insurance giant American International Group Inc. The week before the government seized control of mortgage finance companies Fannie Mae and Freddie Mac. Bank of America completed its purchase of Merrill Lynch on Jan. 1.
In January, Bank of America reported a $2.39 billion fourth-quarter loss, and Merrill Lynch disclosed a loss of more than $15 billion. Bernanke said it was up to Bank of America to make those disclosures. It wasn't the Fed's responsibility.
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