Federal Reserve Chairman Ben Bernanke needs to explain whether the Fed kept the Securities and Exchange Commission in the dark about Bank of America's acquisition of Merrill Lynch before the central bank is given more power under financial reforms, Rep. Darrell Issa , R-Calif., told CNBC

"We're simply going where the documents lead us… as we look at reform, we've got to go back to the rule of law and laws have to be written and then obeyed," Issa, ranking member of the House Oversight and Government Reform Committee, told "Squawk Box."

Bernanke will have to answer the Committee's questions at 10 am New York time Thursday.

Bank of America merged with Merrill Lynch last year after weekend negotiations, in an attempt to save Merrill from collapsing.

The inquiry should have taken place earlier, Issa said, and is all the more necessary as under new rules the Fed may be given additional powers to oversee the financial markets. Issa stressed the hearing was not directed at Bernanke personally and did not offer a clear answer when asked whether he should be reappointed as Fed chairman or not.

"Bernanke's failures are not a great deal in the total picture. Not informing the SEC… literally trying to prevent the SEC from being at the table…that's wrong," he said. "This is, in fact, a cover up, it is a failure to disclose, deliberately, and with emails."

"If they have this authority going into the future, are we right to say the SEC is a lapdog to be told when the Fed wants and not told when it doesn't want? You wouldn't accept that from public companies' CEOs," Issa added.

A Republican memo prepared for the hearing on Thursday describes Bernanke as a champion of government intrusion and an ally of President Obama, the New York Times reported.

Asked whether Thursday's hearing was in fact opening the door for more pressure and allegations against Bernanke, who is seen by many in the market as essential for alleviating the financial crisis, Issa said:

"If you need Bernanke, how do you keep him from having a stroke or a heart attack if he's so indispensable?"

I wonder how Ken Lewis feels about this. He lost his chairmanship largely because of the Merrill deal and now it might be confirmed that he was in fact forced to follow through. When Lewis was worried about shareholder lawsuits, he asked Bernanke if Lewis could use as a defense the fact that the government forced him into the deal. Bernanke said he could not. Frontline just ran a great episode on Bank of America that is still available online for those interested.

 I don't think Bernanke nor Paulson will ever go to jail for the things they've done.

the TARP did what it was supposed to do: "save" the banks

and the bank in return are rewarding their employees.

For example, GS is reportedly giving about 300+ employees million dollar bonuses --- how can this be, when it's been reported that AIG (who were given $180B) handed them $20-50B in secret back-door style.

and Citigroup is now increasing its salaries to top execs.

it's the top talent that created this mess

I certainly don't believe that the janitors, secretaries, mail-personnel, interns, message boys, etc created CDOs, etc.

 

It seems it will take years to unravel the truth

 Lisa- I don't know how long it will take to "uncover" the truth; but, regardless of what happened, there's no way that Bernanke goes to jail if Paulson doesn't go to jail.

And, there's nearly a 100% chance that Paulson does not go to jail.

People from Goldman Sachs do not go to jail. They just keep screwing the masses out of their money left and right.

The current scheme is this Cap-and-Trade bill that has been passed by the House and waits for the Senate votes

I agree podstock.  Lots to think about there