Mumbai: The Federal Reserve Board has granted formal approval to JP Morgan Chase's acquisition of a banking unit of Bear Stearns.

The acquisition of Princeton, New Jersey-based Bear Stearns Bank & Trust, leveraged by Fed funds, did not require Fed permission, the central bank said in a statement.

The formal permission was indented to sooth Wall Street tensions, it said.

"Based on all the facts and circumstances, the Board has determined that an emergency exists requiring expeditious action on the proposal," the Fed statement read.

Defending the central bank's decision to offer as much as $30 billion for the rescue action, Fed chief Ben Bernanke said the Federal Reserve saw no choice but to orchestrate a dramatic rescue of Bear Stearns after the investment bank warned of imminent bankruptcy.

Bernanke was expected to face tough questioning from some members at the congressional Joint Economic Committee who see no justification in Fed putting taxpayers' money at risk to rescue a Wall Street bank.

Fed and JPMorgan announced an emergency funding deal on March 14, a day after Bear Stearns informed the Fed and other government agencies that it would have to file for Chapter 11 bankruptcy protection unless alternative sources of funds became available.

"This news raised difficult questions of public policy," Bernanke said in his prepared remarks. "However, the issues raised here extended well beyond the fate of one company," he added.

JPMorgan, which agreed to buy Bear Stearns at $2 per share on March 16, raised the offer to $10 a share since then.