Lawmakers claim to have uncovered evidence that the Federal Reserve tried to hide from other financial regulators its involvement in Bank of America's (BoA) takeover of Merrill Lynch.

Ben Bernanke, the chairman of the Federal Reserve, is due to appear at a hearing of the House Oversight and Government Reform Committee tomorrow.

Darrell Issa, the senior Republican on the committee, told Reuters: "The committee has already learned that Ben Bernanke and the Federal Reserve made inappropriate threats to fire Bank of America management unless they went ahead with the shotgun wedding that was the Merrill Lynch acquisition."

He added: "The Federal Reserve also engaged in a cover-up and deliberately hid concerns and pertinent details about the merger from other federal regulatory agencies."

The Congressional committee is investigating BoA's $50 billion, all-share purchase of Merrill Lynch last September.

Kenneth Lewis, chief executive of BoA tried to back out of the deal in December in the face of mounting losses at the investment bank but claims that he was pressured by Mr Bernanke and Hank Paulson, the then-Treasury Secretary, into going ahead with the acquisition because its collapse would further unsettle the financial markets.

In January, the Government handed BoA a $25 billion bailout to help the North Carolina-based bank absorb Merrill Lynch's $15.8 billion fourth-quarter loss.

The committee subpoenaed the Fed to obtain documents related to the transaction.

Sources told Reuters that the Fed withheld information on its dealings with BoA from the Securities and Exchange Commission and the Office of the Comptroller of the Currency.

The Fed's actions are key because President Barack Obama last week announced regulatory reforms that would hand even more power to the central bank to oversee US banks.

A Fed spokeswoman declined to comment on Mr Issa's claims. Mr Bernanke has denied in previous testimony to Congressional committees and in letters to lawmakers that he or the central bank behaved improperly during discussions with BoA in December.

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