The Wall Street Journal Wednesday, in a follow-up to a December piece revealing the closure of SEC and New York Attorney General's investigations of Bear's mortgage securities sales, reported the SEC has refused to tell Congress why its investigation was closed.
The securities in question are complex collateralized debt obligations that no one has figured out how to price properly. But the Journal's original story framed the investigations, which were closed in 2005, as missed opportunities to get ahead of today's mortgage securities mess. In an April 2 letter to Sen. Charles Grassley of Iowa, SEC Chairman Christopher Cox refused to even acknowledge the existence of such an investigation. Grassley, the ranking Republican on the Senate Finance Committee, has subsequently been joined by committee chairman Max Baucus, D-Mont., in asking the SEC to give up some details.
Given that the SEC inspector general is already looking into why the matter was dropped, Cox's response appears disingenuous. Still, it's hard to believe Grassley and Baucus can't muster up their own SEC sources to tell them what happened.
Also, neither lawmaker is making hay about New York's decision to drop its investigation. The New York Attorney General's Office, headed in 2005 by Eliot Spitzer, was looking into Bear's pricing of $16 million of mortgage securities sold to an institutional client, according to the Journal. It's unlikely that Spitzer, in the midst of the anti-Wall Street crusade that launched him into the governor's office, would have backed away if there was any hope of pinning a charge of wrongdoing on Bear.
Perhaps their push is a turf battle with Cox over how much lawmakers can order the SEC to make public. - Bill McConnell
See story from MarketWatch
See previous coverage of the Bear Stearns investigations from IowaPoltics.com
The Securities and Exchange Commission isn't the only
party withholding what they know about aborted investigations into Bear Stearns Cos.'
pricing of mortgage-backed securities.
