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Nye Lavalle

SEC Rebuffs Lawmakers Over Bear Citing Privacy,
Agency Won't SayWhy It Ended Probe
By MICHAEL SICONOLFI
April 23, 2008

Securities regulators refused a congressional request to disclose why they dropped an investigation into whether Bear Stearns Cos. harmed investors by improperly valuing complex debt securities.

The Securities and Exchange Commission cited confidentiality in its decision involving the late-stage probe of the Wall Street firm.


At issue is a move by the SEC to abort an enforcement case into activities at Bear Stearns several months before the firm imploded in March. The firm has agreed to be acquired for a fire-sale price by J.P. Morgan Chase & Co.

The Wall Street Journal reported in December that investigators including the SEC had pulled back from bringing two cases begun in 2005 against Bear Stearns involving collateralized debt obligations, or thinly traded investments that package pools of loans. In an April 2 letter, Sen. Charles Grassley, an Iowa Republican, requested information from the SEC into the circumstances surrounding the dropped case.

"The Commission does not disclose the existence or nonexistence of an investigation or information generated in any investigation unless made a matter of public record in proceedings brought before the Commission or the courts," SEC Chairman Christopher Cox said in an April 16 letter to Sen. Grassley, the ranking member of the Senate Finance Committee.

The move sets the stage for further wrangling. Legislators could argue that they previously have sought -- and received -- much more-sensitive-classified data, and that the SEC investigations wouldn't harm the parties involved because they had been dropped. Bear Stearns soon will lose its independence, becoming part of J.P. Morgan Chase.

Legislators also could argue that the SEC wouldn't be releasing data to the public, but rather to Congress. Meantime, the SEC's inspector general is investigating circumstances related to the dropped Bear Stearns case, following a request by Sen. Grassley.

An SEC spokesman declined to comment. Bear Stearns has said it cooperated with both investigations. Sens. Grassley and Max Baucus (D., Mont.), chairman of the Finance Committee, said Tuesday they will continue to pursue the information from the SEC.

The SEC branch office in 2005 said it planned to recommend that Bear Stearns be charged for the way it priced and valued about $63 million of CDOs.

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Well, it'll be interesting to see what happens to "other" BS investigations.........

http://dealbook.blogs.nytimes.com/2008/02/15/bear-stearns-investigation-said-to-center-on-managers/

http://www.marketwatch.com/news/story/prosecutors-said-probing-bear-stearns/story.aspx?guid=%7BA26FD326-C6F8-42B8-8DD6-7F83B871AE3E%7D

http://money.aol.com/news/articles/qp/pr/_a/milberg-llp-announces-its-investigation/rfid85373319

http://www.reuters.com/article/pressRelease/idUS235571+18-Mar-2008+BW20080318

http://news.findlaw.com/prnewswire/20080317/17mar20081951.html

http://www.prnewswire.com/cgi-bin/stories.pl?ACCT=109&STORY=/www/story/03-18-2008/0004776300&EDATE=
 
http://www.iht.com/articles/2008/04/15/business/bear.php

http://www.bloomberg.com/apps/news?pid=20601087&sid=aUb.icycbiXs&refer=home

http://www.forbes.com/reuters/feeds/reuters/2008/04/17/2008-04-17T225158Z_01_N17213893_RTRIDST_0_USA-SUBPRIME-FBI.html
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Is Wall Street’s "Top-Cop" Involved in a Subprime Cover Up?

April 24, 2008

 

The ongoing subprime credit crunch is far from over. As my colleague Eric Roseman pointed out in an article yesterday, the prime-indicator that signaled the crisis is flashing red again… this time in several economies overseas.

Here at home, Uncle Sam is doing his level-headed best to simply sweep this crisis under the rug. In fact, regulators have even gone so far as to hush-up an investigation into the demise of Bear Stearns. Shocked? Don’t be…

Back in January I described how U.S. credit-rating agencies were under pressure to maintain an investment grade seal of approval on hundreds of billions in sub-prime debt and other sordid asset-backed securities.

But Washington’s attempt to cover-up this mess goes even further… straight to the top of the Securities Exchange Commission.

The SEC is responsible for regulating securities firms, and bringing enforcement actions when necessary.  But it seems America’s “top-cop” abruptly ended an enforcement case into activities at Bear Stearns – just months before the firm imploded in March.

What Did the SEC Know About Bear Stearns, and Why Did They Do Nothing?

As far back as 2005 – in the hey-day of the subprime lending craze – the SEC “said it planned to recommend that Bear Stearns be charged for the way it priced and valued about $63 million of CDOs,” according to the Wall Street Journal.

These are the now toxic collateralized debt obligations that Bear Stearns, and other Wall Street firms happily churned out in record numbers during the boom. Aided and abetted with triple-A credit ratings from the big agencies to make them more saleable, Wall Street pawned-off these toxic securities to investors globally.

So far, big banks and brokerage firms have collectively suffered losses of more than $300 billion (and still counting) in the credit market bust that followed. Most of these losses and asset write-offs are due to CDOs; many of which are trading today at just a fraction of the value that Bear Stearns and others originally sold them for.

Since the SECs investigation into Bear Stearns activity apparently began way back in 2005, you’d think they would have dug up enough subprime dirt to bring an enforcement action. But last December, the SEC apparently “pulled back” from this investigation without bringing any formal charges. Three months later, with Bear Stearns practically bankrupt, it was sold off to J.P. Morgan at a fire-sale price.

Taxpayers Have a Right to Know...

It turns out that Congress got wind of the Bear Stearns probe, and curious as to why the SEC prematurely scuttled its investigation, requested information. According to the story, “In an April 2 letter, Sen. Charles Grassley, an Iowa Republican, requested information from the SEC into the circumstances surrounding the dropped case.”

Citing “confidentiality” the SEC has so far refused to share details with Congress. However, taxpayers are now on the hook for $29 billion worth of Bear Stearns assets that the Federal Reserve was kind enough to “guarantee” as part of the fire sale to J.P. Morgan. So with taxpayer’s money on the line, I think Congress deserves an explanation.

What does the SEC have to hide anyway? Bear Stearns is now practically dead and buried. Are there details of Wall Street’s subprime shenanigans that the SEC doesn’t want investors to find out about?  Inquiring minds want to know…

http://burnickblog.sovereignsociety.com/2008/04/is-wall-streets.html

Jake Zamansky's Blog

Senator Grassley and the SEC

Posted: 23 Apr 2008 11:40 AM CDT

It’s well known to anyone with experience representing individual investors that the SEC is shamefully ineffective when it comes to regulating the major brokerage firms. To wit: the SEC might have prevented the collapse of the auction rate securities market. The agency knew of extensive wrongdoing in the marketplace as far back as 2006, but instead of mandating a wholesale cleanup and imposing extensive fines, it chose to let Wall Street off with barely a wrist slap.

It also can be argued that the SEC might have prevented the collapse of Bear Stearns. It’s publicly known that the SEC dropped an investigation of Bear’s valuations of collateralized debt obligations just months before the firm collapsed. We now know those valuations weren’t worth the paper they were printed on.

Sen. Charles Grassley, the ranking member of the Senate Finance Committee, admirably and justifiably wants to know why the SEC dropped its Bear investigation. But
according to today’s Wall Street Journal, the SEC responded to the Senator as if he was just a reporter.

“The commission does not disclose the existence or nonexistence of an investigation or information generated in any investigation unless made a matter of public record in proceeding before the Commission or the courts,” the SEC responded in a letter.

It doesn’t take a rocket scientist to figure out what’s going on here. The SEC’s decision to close its Bear investigation represents yet another monumental agency failure. The agency knows full well that Congress will be outraged if the truth about its failure to protect investors becomes publicly known. Let’s hope that Senator Grassley is sufficiently outraged by the SEC’s response and continues to aggressively pursue this matter. The findings won’t be pretty, but maybe it will finally lead to some real -- and much needed -- regulatory reform.

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