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Congress to investigate Federal Reserve

Original post made by a on Mar 20, 2008

Good! My call to Eshoo made a difference! Let's get more transparency and more accountability! No more free and easy money for the bankers!

Congress to probe Fed's role in Bear's buyout: report
Marketwatch - March 20, 2008 10:43 AM ET

NEW YORK (MarketWatch) -- Congress is starting to probe the Federal Reserve-backed agreement to sell Bear Stearns to J.P. Morgan Chase, examining the deal to see if it complied with regulations and trying to determine taxpayer exposure, The Wall Street Journal reported Thursday.

Rep. Henry Waxman, D-Calif., who heads the House Oversight and Government Reform Committee, wants to take a closer look at what the potential taxpayer exposure may be, the paper reported, citing an unnamed aide to the congressman.

"The dramatic and unprecedented actions over the weekend by the Federal Reserve and by the Treasury will be just the first of numerous private and public steps to preserve liquidity in the market and to facilitate rational actions to strengthen the economy," said Sen. Max Baucus, D-Mont., chairman of the Senate Finance Committee, in a statement released to MarketWatch.

"These actions could either implicate or involve securities and tax laws, and I am working to determine whether and to what extent that is the case," Baucus said.

The Senate Finance Committee has also announced it will conduct its own investigation into the bailout.

The Fed agreed Sunday to provide financing for up to $30 billion of less-liquid assets held by Bear Stearns (BSC). Roughly $20 billion of that funding will back mortgage securities.

J.P. Morgan (JPM) will exchange 0.05473 of a share of common stock for one share of Bear Stearns. Both boards have approved the transaction, which values Bear Stearns at around $2 a share.

Waxman has made headlines recently for conducting high-profile probes into the disparity between pay and performance for executives of financial institutions.

On Thursday, Congressman Barney Frank, who is the head of the House Financial Services Committee, called on lawmakers Thursday morning to find new ways to stabilize the economy.

Frank suggested reforming the regulatory system currently in place, as well as reexamining what capital means in today's economy and monitoring auction rate securities and municipal bond markets more closely.

"Ultimately, Congress has a duty to respond appropriately to increasing bad news in the economy," Baucus said.

Comments (12)

Posted by a, a resident of Adobe-Meadows
on Mar 20, 2008 at 1:48 pm

The federal reserve gave $28.8 billion of taxpayer money this week to the same bankers who created the subprime. This is money that could have been used to improve infrastructure, schools, increase teacher pay, healthcare and even social security. But instead the bankers got it and all without any debate from Congress or even care from the public. It's remarkable how an ignorant public lets itself get robbed in broad daylight.


Posted by chris, a resident of University South
on Mar 20, 2008 at 3:01 pm

The Bear shareholders are receiving $2/share from JPMorgan. I don't think the Bear owners think they are being bailed out.

The Fed is only in this position because the administration and Congress have abdicated their responsibilities for setting prudent fiscal policies and establishing prudent regulatory authority.
The Fed only has responsibility for monetary policy, not the entire economy.

You could say that the Fed is bailing out Bush and Waxman. What were they doing when the housing bubble was being inflated?


Posted by a, a resident of Adobe-Meadows
on Mar 20, 2008 at 3:53 pm

The fed is bailing out Bush to the detriment of the economy. Monetary policy has an humongo impact on the entire economy and the standard of living and the fed is going to cause another inflation bubble. The fed created the housing bubble by lowering interest rates, the housing industry was an enormous part of the economy as you can see with this bubble burst. The fed caused this and now they're causing another inflation bubble. Pretty soon the U.S. economy is going to crash and burn. We should not allow this to happen.


Posted by where is the beef, a resident of another community
on Mar 20, 2008 at 3:56 pm

What is missed in the discussion is where is the beef?

The media would lead you to believe that BEAR STEARNS was a worthless wreck. Nothing could be further from the truth. Simply put BEAR STEARNS held mortgages that were backed by assets. Absent bankruptcy the people that are paying for the home loans in question are still on the hook for these loans at FULL VALUE of the mortgage.

>> What got them was the paper invention of leveraging of those unpaid over capitalized assets to marginally committed home buyers.<<

Exactly what is CHASE JP MORGAN getting for their 236 million dollar investment and why was 30 BILLION lent by the NY FEDERAL RESERVE? To examine the books would yield an answer that would cause most Americans to choke. Not only did they get paid to own this company they now control the assets of this company the good loans and the bad loans and with the bad loans they will find themselves the holders of property that will eventual be sold and JP MORGAN will recover the capital proceeds from those sales.

Now with all this devaluation we have only one place to go and this is up up up with inflation, so stop your whining and get use to it.

Can you imagine the power that it takes to rip-off the American public at this level?

Makes any thing going on in Palo Alto politics something like ants arguing which park picnic table leg to go up.

The Palo Alto conversation:

Dick: Honey! Did you know that the tax payer paid JP MORGAN to take over a private company as well as some extra 29 BILLION dollars in operating capital!

Jane: Gee sweetie that's nice. Did you get a venti soy hazelnut vanilla cinnamon white mocha today?

Congress won't do squat. There is too much $ at stake.


Posted by a, a resident of Adobe-Meadows
on Mar 20, 2008 at 4:04 pm

Get used to eating less beef and buying fewer mochas.


Posted by chris, a resident of University South
on Mar 20, 2008 at 7:14 pm

Greenspan was a horrible Fed chairman but hardly anybody called him on it while he was in office. In addition, it was not the FED that spent $1 trillion in Iraq without any return to show for it and without any tax revenue to pay for it.

Given Bernanke some credit for dealing with the mess that Bush and Greenspan dumped on him.


Posted by where is the beef, a resident of another community
on Mar 20, 2008 at 10:05 pm

Liberals always wanting to make every issue a black vs. white or jackass vs. elephant matter. My friends the color of freedom in America is not Black or White or Brown or Blue or Red, no no no it is GREEN!

You all work for the company store and you don't even know it.

Most all of you attempt to live the magazine lifestyle on borrowed money. Listen up!
That is how we got here - IN DEBT- and the very nano-second you swipe that card the boys in New York got you, oh yes they do they got a piece of you. I guarantee it.


Posted by where is the beef, a resident of another community
on Mar 20, 2008 at 11:13 pm

Uh oh!

Web Link

But do Dick and Jane know this?

Web Link

When there is no more equity and your neighbor's debt exceeds the value of the home people will just walk away. Then your imaginary equity will be gone! Tax rates will fall and then what? Librarys, Pot Holes, Street Lights. Police, Fire and Schools will be cut.





Posted by Too blind to see, a resident of another community
on Mar 22, 2008 at 12:04 pm

Investigate your LOCAL government first. Try fixing your own problems first.

$455 million short?
City Manager, 900,000.00 for a home, 500,000.00 Loan. 18,000.00 for property Tax. 200,000.00 salary for WHAT?.. 24 million Enron..

The list goes on&on&on.....


Posted by where is the beef, a resident of another community
on Mar 24, 2008 at 1:21 am

The plot thickens or a few fat scraps tossed into the mix:

--- US financial services giant JP Morgan Chase could increase its offer for Bear Stearns from US$2 per share to US$10 a share, in a bid to quell any resistance by shareholders of the troubled Wall Street firm. ----

Think a bigger number JP.

The real short story of a long or perhaps a put of a call.
Having a huge broker (Bear Stearns) go bankrupt (or worse a run on the firm*) would put all assets held by the firm in the traditional frozen status of a bankruptcy, this would have caused a whopping problem not only for the customers as well as the flow of commerce and trading. Therefore the Fed and JPMorgan jumped in. What is going on today are huge credit swaps that in my opinion are the precursor of insolvency. You cannot run a business like the government runs the United States budget.

But you knew that - yet you still vote for the same old re-treded political thinking.

If you want to eliminate the competition by takeover that is one thing but stealing the company with tax payer funds, well that's something different.

* a run would cause the craziest tax bonanza for the US Government and a re-valuation that would have massive consequences for everyone. The dumping of all those holdings would have been disastrous.

Investment products: Not FDIC insured • No bank guarantee • May lose value


Posted by perspective, a resident of Midtown
on Mar 24, 2008 at 7:07 am

you guys need to read up on how economies work...it isn't intuitive, until you start understanding incentives and how individual reactions to policies set into place a tidal wave on an economy. Start with anything by Sowell, then move on to "Freakonomics" and/or "The Logic of Life"..

don't have to do calculus to be able to understand these guys. Sowell, in fact, is probably the most accessible of all the economists who have written for "the lay person".

THEN maybe you can type something up that makes sense.


Posted by 13 x-ray, a resident of another community
on Mar 24, 2008 at 8:15 am

>>> City Manager, 900,000.00 for a home, 500,000.00 Loan. 18,000.00 for property Tax. 200,000.00 salary for WHAT?

To keep all the unknowing Palo Alto tax suckers in line.



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