Bernanke's 'Cover Up' Must Be Explained: Rep. Issa

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.

Federal Reserve Chairman Ben Bernanke
J. Scott Applewhite

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?"