US FDIC's Bair says was urged into BofA aid

* Bair says FDIC was urged to provide aid to BofA

* Says FDIC was not initially convinced of need

* Agency ultimately convinced after Treasury, Fed urging

WASHINGTON, Dec 11 (Reuters) - The Federal Deposit Insurance Corp resisted urging from the administration to extend assistance to Bank of America (BAC.N) to complete its acquisition of Merrill Lynch but was ultimately convinced of the need, Chairman Sheila Bair said on Friday.

Bair said the agency continued to raise questions about whether further assistance was really necessary and about the potential exposure for the FDIC.

"The FDIC's Board ultimately was persuaded that BOA's condition presented a systemic risk, and that the ring fence transaction would mitigate that risk -- and the risk to the Deposit Insurance Fund -- in a cost effective manner," Bair said in remarks prepared for delivery before a House oversight panel examining the Bank of America and Merrill Lynch merger.

The hearing is the fifth in a series looking at the government's role in the merger that was announced late last year during the height of the financial crisis, and whether Bank of America misled investors about Merrill's looming losses.

Bair, who has been a vocal opponent of poorly underwritten government bailouts, said the FDIC was told by the Federal Reserve and Treasury near Dec. 21, 2008, that Bank of America had expressed reservation about completing the Merrill deal.

The FDIC continued to raise questions about whether further aid was really needed, despite former Treasury Secretary Henry Paulson indicating that he hoped the FDIC would provide asset guarantees similar to those it provided for Citigroup, Bair said.

She said over the following days, the FDIC requested detailed information about where Bank of America's exposures resided, particularly how much was housed in the insured depository institution.

After several days of discussion and the FDIC continuing to not commit to assistance, the FDIC board ultimately agreed on Jan. 15, 2009 that Bank of America's condition posed a systemic risk that a "ring fence transaction" involving asset guarantees from the FDIC would mitigate, Bair said.

That asset guarantee deal, as well as a capital infusion, was announced on Jan. 16, but the ring fence transaction was never finalized and was ultimately terminated. (Reporting by Karey Wutkowski; Editing by Andrea Ricci)