US Senators Question Players In Bear Stearns Deal

by Leroy Baker, Tax-News.com, New York

27 March 2008

Senate Finance Committee Chairman Max Baucus (D-Mont) and Ranking Member Chuck Grassley (R-Iowa) are inquiring this week into the terms of the recent, taxpayer-backed sale of the failing Bear Stearns investment firm to JPMorgan Chase.

In a letter to the firms’ chief executive officers, as well as to Federal Reserve Chairman Ben Bernanke, Treasury Secretary Henry Paulson, and Federal Reserve Bank CEO Timothy Geithner, the Senators requested exact details of the sale agreement, including how and by whom it was negotiated, and all parties to it.

The Finance Committee has jurisdiction over US debt and the Treasury-backed securities used to guarantee the Bear Stearns deal.

“Americans are being asked to back a brand-new kind of transaction, to the tune of tens of billions of dollars. With jurisdiction over federal debt, it’s the Finance Committee’s responsibility to pin down just how the government decided to front USD30 billion in taxpayer dollars for the Bear Stearns deal, and to monitor the changing terms of the sale,” commented Baucus.

“Economic times are tight on Main Street as well as on Wall Street, and we have a responsibility to all taxpayers to review the details of this deal," he added.

“Separate from the question of what was needed, or not, to avoid a market panic in the Bear Stearns case are the implications of the deal for the taxpayers,” stressed Grassley.

“Congress has a responsibility to look at whether the taxpayers will lose money here, what kind of precedent this sets for federal involvement when other firms over-extend themselves, how this will affect the marketplace in other direct and indirect ways, and whether top executives will come out better than the rank-and-file workers who weren’t in the room negotiating the deal," he argued.

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