Did JPMorgan stick Fed with Bear's worst assets? They won't say!
Does the Fed's bailout of Bear Stearns leave taxpayers on the hook for $30B in loans backed by flimsy collateral? During today's Senate hearing, JPMorgan CEO James Dimon tried to assure lawmakers that his firm didn't cherry pick Bear's assets.
Some lawmakers Thursday questioned whether the Fed, which could theoretically be on the hook for as much as $29 billion under the current Bear arrangement, had accepted collateral of dubious value and left JPMorgan with the choicest parts of Bear’s book. [...]
Mr. Dimon said the collateral offered to the Fed for the loan consisted of “investment grade” assets, and not the riskier batch of mortgage-backed securities and other soured assets held by Bear.
In the same statement, though, Mr. Dimon made it clear that the Fed’s decision to bear the brunt of any losses on the collateral was a linchpin of the deal.
He said the bank “could not and would not” have gone through with its takeover of Bear without the Fed’s guarantee of a $30 billion credit line.
So what specific assets did the Fed receive as collateral for the $30B loan? Apparently, it's top secret.
Some lawmakers Thursday still wanted to know just how Bear’s collateral was divvied up. If the Fed didn’t get the worst assets, did it get the best — or just a random collection? (One lawmaker sarcastically suggested that perhaps they were doled out in alphabetical order.)
Neither Bernanke nor New York Fed President Tim Geithner nor JPMorgan CEO James Dimon nor Bear Stearns president Alan Schwartz would disclose any details. Why isn't collateral put up by a public company to secure a loan from the federal government public information?
