Waxman To Investigate Firm Managing Fed's $30 Billion Loan

Lawmakers are just starting to poke around the Federal Reserve's sudden action last month to float nearly $30 billion in loans to rescue Wall Street giant Bear Stearns – and not surprisingly, Henry A. Waxman wants a piece of the action.

The inquisitive chairman of the House Oversight and Government Reform Committee has sent a letter to the Federal Reserve, demanding a series of answers about why the BlackRock financial management firm won the bid to manage the $30 billion the Fed loaned to JPMorgan Chase to purchase Bear Stearns at a bargain basement price.

"It appears, however, that BlackRock is now directly responsible for managing a $30 billion portfolio on behalf of the American taxpayer," the California Democrat wrote New York Federal Reserve Bank President Timothy Geithner. "If BlackRock does its job well, the taxpayers will be made whole or even experience a gain. If BlackRock is not successful, the taxpayers stand to lose billions of dollars. In effect, it appears that BlackRock is serving as a government contractor providing complex financial services to the Federal Reserve."

Waxman says he wants to know more about BlackRock's role in managing the money, why it received a no-bid contract and whether the company's portfolio has investments in distressed mortgages or anything that may be in conflict with its new role in managing the Fed's money during the housing meltdown.