Bear
Stearns,
Banks Questioned Over $30 Billion 'Loan'
Wednesday, March 26th,
2008
Senate committee leaders are committing themselves to
investigating the takeover of Bear Stearns investment firm - and heavy
hitters in the banking and Wall Street worlds are probably losing sleep
tonight, as the spotlight on the Bear Stearns transaction gets
hotter. The New York Times
reported today that former presidential candidate and Connecticut
Senator Christopher J. Dodd asked Treasury Secretary
Henry M. Paulson, Jr., Ben Bernanke
(Federal Reserve Chairman), top executives at Bear
Stearns, and honchos at JPMorgan Chase Bank
to appear before his panel on April 3rd with some
answers.
The Bear Stearns Companies, Inc. - one of
the largest global investment banks and securities trading / brokerage
firms in the world - was hurting financially in it's mortgage-backed
securities. On March 16th, surrounded by media speculation of
bankruptcy and a Wall Street collapse, Bear Sterns announced a merger
with JPMorgan Chase Bank, in which JPMorgan Chase would seize control of
shareholder approval. The Federal Reserve subsequently gave JPMorgan
Chase a $30 billion line of credit to assist with any losses in the Bear
Sterns' investments.
In hard economic times, in the midst of
a housing slump that has hurt the working class as hard - if not
harder - than the big businesses, the Federal Reserve chose to bail out
JPMorgan with $30 billion of taxpayers' dollars
(yes, taxpayer dollars/this means you/aren't you glad you were consulted?)
to one company and not others.
"The sale agreement between JPMorgan
Chase and Bear Stearns raises serious public policy questions regarding
the role played by the Federal Reserve, Treasury, and Securities and
Exchange Commission as facilitators of this agreement," Senator Dodd said
in a statement.
The Senate Finance Committee - specifically,
Senator's Max Baucus (D, Montana) and Charles
Grassley (R, Iowa) - is investigating how and why the Fed
agreed to extend such a large line of credit
selectively.
"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 $30
billion in taxpayer dollars for the Bear Stearns deal," said the Finance
Committee's press release. "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."
And this, folks, doesn't even begin to
address the massive layoffs that have been a result of the "deal":
media reports say JPMorgan
will cut up to 50% of Bear's 14,000 workers; which is hard to pin down
since Bear employees are not allowed to talk to the press in fear of
punishment.
In an interview with National Public Radio, Sen. Christopher Dodd said, "I
have great respect for [James] Jamie Dimon, who's head of
JPMorgan...[but] he also sits on the board of directors at the Federal
Reserve in New York. Having decisions being made over the weekend
with an institution where it's leader is also a member of that board
raises some serious issues. It ought to be addressed."
Dodd
was asked if Dimon's seat on the NY Board of the Fed might be a conflict
of interest. "This is what we needed to talk about," Dodd
responded.
This is the very print-and-spend theory that Congressman
Ron Paul warned Federal Reserve
chairman Ben Bernanke is contributing to the housing market
crash, at the Joint Economic Committee in November of
2007. Over a year ago, Paul breached to Congress the
issue of the secretive transactions taking place between the
Federal Reserve and other banks, claiming Congress is failing to
require the full disclosure they are owed.
"Our monetary
system," Paul told the House Financial Services Committee,
"Insidiously transfers wealth from the poor and the middle class to the
privileged rich. Wages never keep up with profits on Wall Street and
the banks."
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