WASHINGTON, D.C. -- At last Thursday's Senate Banking Committee hearing on the government's historic bailout of Bear Stearns, two questions were expected. Who set the initial bargain basement price of $2 a share for the investment bank? Who picked JPMorgan Chase as the fortunate buyer? Those questions were not clearly asked, and were not answered at all.
The hearing, transferred from the Banking Committee's cozy quarters to spacious Room G-50 in the Dirksen Senate Office Building, was televised and attracted a packed audience. Details of the government's extraordinary intervention promised a tense interrogation. But this was not the customary confrontation between lame-duck Republican officials and majority congressional Democrats. On either side of the table were brothers, as if Wall Street had moved to Washington.
While conservatives inside the administration are unhappy about intervention in markets, President Bush seems content with how the Federal Reserve and Treasury cooked up the deal with erstwhile colleagues in Wall Street. There is little conservative or Republican about the administration's approach to the fiscal crisis, as reflected in Room G-50. Uncritical Democratic senators were not even inquisitive.
The closest a senator came to asking who set the price for JPMorgan was this apologetic question from Committee Chairman Christopher Dodd: "There's just reports -- I want to share them with you -- that JPMorgan Chase would make an offer of $4 a share. ... Did you or anyone in your agency provide feedback to JPMorgan or Bear Stearns on the value of that offer?"
Federal Reserve Chairman Ben Bernanke said there was no "interjection" by the Fed "to my knowledge." "There was a view," said Treasury Under Secretary Robert Steel, "that the price should not be very high." But Steel quickly added, "With regards to the specifics, the actual deal was negotiated" by the New York Federal Reserve Bank. Timothy Geithner, president of the New York Fed, then said: "Let me just echo what the chairman (Bernanke) and Bob Steel said" -- which was nothing. "We did not set or negotiate the price," Geithner said later. But who did? Senators did not demand to find out and did not inquire how JPMorgan was selected.