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Grassley questions Bear Stearns bailout |
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By J. Taylor Rushing
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Posted: 03/20/08 04:47 PM [ET] |
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The Senate Finance Committee’s top Republican on Thursday questioned the Federal Reserve’s bailout of Bear Stearns and whether the action may have benefited top executives at the expense of shareholders. “Corporate bigwigs shouldn’t be able to profit from a deal while employees, shareholders and creditors have to carry the burden of a company’s demise,” Sen. Charles Grassley (Iowa) said in a statement. He said he had asked staffers to “delve into the details” of the Bear Stearns buyout by JP Morgan Chase. The Federal Reserve engineered the buyout, which JP Morgan agreed to after the Fed said it would assume $30 billion of risky Bear Stearns mortgage bonds. Bear Stearns would have filed for bankruptcy if the deal had not gone through, which the Fed worried would cause more serious problems for the U.S. economy. Grassley stopped short of calling for hearings for the Federal Reserve’s actions. He also said he was not questioning the decision to prevent Bear Stearns from sliding into bankruptcy. “My point is not that bankruptcy would’ve been the better course for Bear Stearns,” he said. “I’m looking at a slice of the consequences. The top executives shouldn’t be treated better than anyone else when a company goes under.” He also said he wanted to understand what the downside risk of the deal is for taxpayers, as well as whether there could be “upside potential.” |
