17 members seek Fed probe over BofA

Seventeen House members from both parties are calling on the Obama administration to investigate the Federal Reserve over its role in Bank of America's acquisition of Merrill Lynch at the height of the financial crisis.

The deal has caused significant controversy on Capitol Hill, where Democrats and Republicans on the House Oversight Committee have held several hearings with former Treasury Secretary Henry Paulson, Federal Reserve Chairman Ben Bernanke and Bank of America CEO Kenneth Lewis.

At issue is whether the federal government, including Paulson and Bernanke, pressured Lewis to complete the Merrill acquisition. Some members have said that they believe Bernanke and Paulson threatened a change in bank management if Lewis pulled out of the deal. The bank was considering filing a "material adverse change" (MAC) that would end the deal after it became aware of as much as $16 billion in losses at Merrill.

The bank decided to carry through on the deal, which was completed in early January.

Bernanke denied making any such threats. “I never said that I would replace the board and management if he invoked the MAC,” Bernanke said at a June hearing. “I expressed concerns about the effects of invoking the MAC, both on the financial system and on the Bank of America itself,” Bernanke said.

On Friday however, three Democrats and 14 Republicans sent a letter to the Obama administration calling on the government to investigate the Fed. The administration has proposed granting the Fed new powers to oversee "systemic risk" as part of its efforts to overhaul the financial system.

"While Chairman Bernanke testified that he made no such threats in relation to the merger, there is a considerable amount of other testimony and evidence that calls into question those claims," the members wrote on Friday. "No additional powers should be contemplated for the Federal Reserve, however, until this issue is thoroughly investigated and the Federal Reserve is cleared of any wrongdoing."

The House members behind the letter are: Chris Carney (D-Pa.), Alan Grayson (D-Fla), Marcy Kaptur (D-Ohio), Scott Garrett (R-N.J.), Tom Price (R-Ga.), Walter Jones (R-N.C.), John Duncan (R-Tenn.), Ron Paul (R-Texas), Thaddeus McCotter (R-Mich.), Marsha Blackburn (R-Tenn.), Michael Burgess (R-Texas), Adrian Smith (R-Neb.), Michele Bachmann (R-Minn.), Louie Gohmert (R-Texas), Dan Burton (R-Ind.), Patrick McHenry (R-N.C.) and Bill Posey (R-Fla).