Treasury Tells Senators What Went Down With Bear

The Treasury Department has responded to a request from Senate leaders for details about its role in the government-engineered rescue of investment bank Bear Stearns.

Senate Finance Chairman Max Baucus (D-Mont.) and ranking member Charles Grassley (R-Iowa) launched the investigation into how the deal for JP Morgan Chase & Co. to buy the investment bank was negotiated and structured. The deal included a $29 billion loan from the Federal Reserve Bank of New York to JP Morgan, essentially putting taxpayers on the hook.

While the Finance Committee heads aren't implying there was any wrongdoing, they are intent on shining some light on the dramatic Fed maneuver.

The Treasury letter shed little new light on what went down. Treasury wasn’t a party to the negotiations but key personnel, including Secretary Henry Paulson, worked closely with the New York Fed as it hammered out the agreement with the two firms, Kevin Fromer, assistant secretary of legislative affairs, wrote to the Finance panel.

“Treasury is very supportive of this agreement, as well as the merger agreement between JPMorgan and Bear Stearns. Among other things, these agreements were necessary and appropriate to maintain stability in our financial system at a critical juncture,” Fromer said.

He stressed that Treasury officials worked with their Fed counterparts throught the process to “minimize risks posed to the taxpayers.”
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