Forum Home Page

Bear Stearns Forum Home Page

Program Reference

SEC Rebuffs
Lawmakers
Over Bear

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.

This Forum program is open, free of charge, to all shareholders of The Bear Stearns Companies, Inc. ("BSC") and to any fiduciaries or professionals concerned with their investment decisions.  Its purpose is to provide shareholders with access to information and a free exchange of views on issues relating to their evaluations of alternatives, addressing issues described in the Forum Summary.

As stated in the posted Conditions of Participation, all Forum participants are expected to make independent use of information obtained through the Forum, subject to the privacy rights of other participants.  It is a Forum rule that participants will not be identified or quoted without their explicit permission.

Inquiries and requests to be included in the Forum's distribution list may be addressed to bsc@shareholderforum.com.