The Federal Reserve held an unusual hearing Monday in Los Angeles on Bank of America Corp.’s proposed $4-billion takeover of troubled Calabasas mortgage lender Countrywide Financial Corp. But it was the Fed itself that came in for some of the harshest criticism, the Los Angeles Times rerpots.

U.S. Rep. Maxine Waters (D-Los Angeles) and others said the Fed needed to atone for failing to rein in the loose credit policies that brought down scores of lenders, took No. 1 mortgage maker Countrywide to the brink of collapse and knocked the economy for a loop.

Given “so troubling a history,” Waters said, “the Federal Reserve bears a heavy responsibility to prove its commitment and competence in the review of the Bank of America-Countrywide transaction.”

Acquiring Countrywide would give Bank of America, the nation’s largest retail bank, 25% of the mortgage market and an easy shot at growing larger as rivals constrict to deal with foreclosures, said Robert Gnaizda, policy director of the Greenlining Institute, a consumer advocacy group. He said he believed that Bank of America could capture 40% of the market within a few years.

Speakers at the hearing said the Fed shouldn’t approve the takeover without requiring industry-leading efforts to keep struggling borrowers in their homes. Several also urged the Fed not to approve the takeover until Bank of America provided more details of a foreclosure-relief plan.

“The outcome of this merger will not only impact working families and neighborhoods, but also the strength of the national economy,” said Kevin Stein, associate director of the San Francisco-based California Reinvestment Coalition.

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