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Will Fed bailouts like Bear Stearns be costly to taxpayers?

*Financial Times, by James Politi, April 8, 2008

“The rescue of Bear Stearns faced further scrutiny in Congress on Tuesday as a powerful Democratic lawmaker demanded more information on the selection of BlackRock as investment manager for $30bn in the bank’s mortgage assets.

A key element of the takeover of Bear by JPMorgan Chase was the quick decision to bring in BlackRock, a New York-based asset management firm run by Laurence Fink, as a portfolio adviser for the $30bn (£15bn) of mortgage assets, which will be used as collateral for a $29bn loan from the Federal Reserve. BlackRock and the Fed agreed to determine the fee for the arrangement at a later date.

In a letter, Henry Waxman, chairman of the House oversight and government reform committee, asked Tim Geithner, president of the Federal Reserve Bank of New York, to answer questions on the decision to give BlackRock a ‘potentially lucrative position…without competition.’

‘When contract terms are not defined in advance, it is usually the taxpayer – not the contractor – who suffers,’ Mr Waxman wrote.”


*This information is solely a highlight of the opinion of a third-party publication and is incomplete.  Please subscribe to this publication for the full and timely opinion of the author and call a Monex Account Representative for any additional up-to-date information. This is not an offer to buy or sell precious metals. Investors should obtain advice based on their own individual circumstances and understand the risk before making any investment decision.

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