Congress demands answers from Fed, Bear Stearns
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By John Poirier and Rachelle YounglaiWASHINGTON (Reuters) - Senior Democrats and at least one Republican on Wednesday demanded details on the role the Federal Reserve and the U.S. Treasury Department played in helping JPMorgan Chase & Co's buyout of Bear Stearns Cos Inc .The Senate Banking Committee set an April 3 hearing to examine the Fed's role in the transaction brokered by U.S. Treasury Secretary Henry Paulson.The Fed guaranteed some $29 billion of illiquid Bear Stearns' assets and allowed JPMorgan to offer $2 a share for what was the fifth-largest U.S. bank. Shareholder protests forced JPMorgan to raise the bid to $10 a share, 93 percent less than its 52-week high of $159.34.Some lawmakers question why the U.S. government is prepared to help rescue a failing Wall Street bank while refusing to rescue millions of home owners facing foreclosure. Lawmakers return to work Monday from a two-week spring break where they heard from the voters."The unprecedented nature of some recent actions by the Federal Reserve, Department of Treasury and others merits a full and public examination by the committee," Christopher Dodd, chairman of the Senate Banking Committee, said in a statement.The Connecticut Democrat also expressed concern that JPMorgan's chairman James Dimon held a Federal Reserve Bank of New York board seat while trying to acquire Bear Stearns.Dodd invited Dimon and Bear Stearns Chief Executive Alan Schwartz to testify along with Fed Chairman Ben Bernanke and Secretary Paulson.He also asked U.S. Securities and Exchange Commission Chairman Christopher Cox and Federal Reserve Bank of New York President Timothy Geithner to testify.Meanwhile, the Democratic chairman and ranking Republican on the U.S. Senate Finance Committee separately asked the Fed, Treasury Department, Federal Reserve Bank of New York and the banks' chief executives for details about the assets that are to be secured by the U.S. central bank."Americans are being asked to back a brand new kind of transaction, to the tune of tens of billions of dollars," Sen. Max Baucus, a Montana Democrat, said in a statement. "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."Baucus and Grassley want details on the transaction and copies of all documents that have been or will be filed with regulators.Rhode Island Sen. Jack Reed said Bear Stearns' near-collapse showed a need to update regulation of the financial services industry."I think there should be a moment of soul-searching among all the regulators about what they have done in the last several months and years and how they can improve dramatically their regulation," said Reed, chairman of the Senate securities, insurance and investment subcommittee,Congress has been grappling with the fallout from the mortgage crisis and questioning whether there was enough oversight of home lenders and credit rating agencies.The U.S. Treasury Department, which began a review of financial services regulation in the summer, is expected to issue recommendations in the next few weeks.Bear stock closed up 2 percent at $11.21 on the New York Stock Exchange. JPMorgan stock fell 4 percent to $44.11.(Reporting by Rachelle Younglai, editing by Leslie Gevirtz)
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