|  | | 2008 News and Press Releases | | |
HEADLINE NEWS:
U.S. Senate Panels To Investigate Bear Stearns Deal
David Stout
International Herald Tribune. March 26, 2008
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EXCERPT: Leaders of two Senate committees said Wednesday that they would investigate the taxpayer-backed takeover of the foundering Bear Stearns investment firm an arrangement that Treasury Secretary Henry Paulson Jr. defended even as he called for more transparency on the part of Wall Street. Senator Christopher Dodd, the Connecticut Democrat who heads the Senate Banking Committee, asked Paulson to appear before his panel on April 3, along with Ben Bernanke, the chairman of the Federal Reserve, and the top executives of Bear Stearns and JPMorgan Chase, which has moved to acquire Bear Stearns. Meanwhile, the Senate Finance Committee will investigate "just how the government decided to front $30 billion in taxpayer dollars for the Bear Stearns deal," in the words of Senator Max Baucus, the Montana Democrat who is chairman of the panel. He and the committee's ranking Republican, Senator Charles Grassley of Iowa, wrote a letter asking for extensive details of the transaction. Paulson defended the Fed's recent offering of a $30 billion credit line to JPMorgan Chase as part of the deal, but he said such moves ought not to become routine. "The Federal Reserve acted promptly to resolve the Bear Stearns situation and avoid a disorderly wind-down," Paulson said at the United States Chamber of Commerce's annual Capital Markets Summit. "It is the job of regulators to come together to address times such as this, and we did so." Paulson said Wall Street investment banks must provide more information about their financial condition if they are occasionally allowed to borrow money from the Federal Reserve as commercial banks do. But he did not call for investment banks to be regulated in the same manner that commercial banks now are. Paulson acknowledged that the Fed's decision to lend to investment banks creates a contradiction between how commercial banks and investment banks are being treated, and he implied that investment banks ought to be subject to the "same type of regulation." But moments later, he said: "Recent market conditions are an exception from the norm. At this time, the Federal Reserve's recent action should be viewed as a precedent only for unusual periods of turmoil. "The Treasury secretary did not break new ground in his remarks, which nevertheless reflected his and the Bush administration's continuing concern with the struggling economy and a growing collective belief that U.S. government regulators need to know more about the often-secretive world of Wall Street finance a world Paulson knows well as a former chief executive of Goldman Sachs. |
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