WASHINGTON - FEDERAL Reserve chairman Ben Bernanke, facing fierce criticism over the rescue of investment giant Merrill Lynch, said on 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 the Bank of America purchase of the Wall Street group, a deal 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 finalise the deal after it wanted to walk away.

Mr 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.'

Mr 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.

Mr 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.'

In the face of a barrage of questions from lawmakers, Mr Bernanke denied that he had threatened to oust Bank of America chief executive Kenneth Lewis.

'I did not instruct (former Treasury Secretary Henry) Mr Paulson or anyone else to convey such a threat or message to Mr Lewis,' Mr Bernanke said.

'I never did make a threat. Never did raise this issue with Ken Lewis at Bank of America,' he said in response to further questions.

Asked about the Fed's aid for the deal, Mr Bernanke said, 'I did not promise any specific amount of money.'

He added that the amount of funds committed 'was the commitment of the government to work in good faith with Bank of America to develop a contingency plan that would assure the viability of the company in case of financial crisis.' -- AFP