Bloomberg reports:

Former Federal Reserve Chairman Paul Volcker said the central bank's loan to an investment bank last month was at ``the very edge'' of its legal authority.

Fed Chairman Ben S. Bernanke last month agreed to take on $29 billon of Bear Stearns Cos.'s assets, paving the way for JPMorgan Chase & Co. to buy its Wall Street rival. Bernanke, who worked with Treasury Secretary Henry Paulson to broker the bailout, last week defended the move as necessary to prevent ``severe'' damage to financial markets.

``The Federal Reserve has judged it necessary to take actions that extend to the very edge of its lawful and implied powers, transcending in the process certain long-embedded central banking principles and practices,'' Volcker said in a speech to the Economic Club of New York.