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Fed's Bear-Chase Bailout Raises Questions of Transparency and Countrywide Subprime Negligence

Byline: Matthew Russell Lee of Inner City Press at the UN: News Analysis
WashPost - Guardian (UK)

WASHINGTON, March 14 -- As the Federal Reserve Board Friday morning voted to  change its rules to back JP Morgan Chase in a bail-out of Bear Stearns, questions expanded about lack of transparency and the Fed's insider role. JPM Chase will assume no credit risk at all, but will have access for at least 28 days to all of Bear's books and collateral, with an eye to buying on the cheap. Jaime Dimon, in a speech here in Washington Wednesday night, spoke of being halfway through the subprime meltdown write-offs, and bragged about the green gut-rehab of Chase's midtown headquarters. Less than two days later, there's talk of Bear Stearns' nearby building being one of its few assets of remaining value -- perhaps most of all to Chase.

            In speech late Friday morning at the Economic Club of New York, President Bush spoke against a bill pending in Congress which would allow bankruptcy judges to modify mortgage loans. This provision was praised on Thursday by, among others, Rep. Brad Miller (D-NC), who noted that the House of Representatives passed such a provision in 1978, but the Senate never followed.

            The Fed to rationalize its favoritism for JPMorgan Chase and Bear Stearns has hearkened back to supposedly similar discount window deals in the 1930s and 1960s. Who benefited then? Who's benefiting now? JPMorgan Chase, it seems clear.

Fed chairman Ben Bernanke, bailout and Countrywide subprime negligence not shown

            JPMorgan Chase is the third largest bank in the U.S.. One place up, in second place to Citigroup, is Bank of America, which has applied to the Fed to scoop up subprime bandit Countrywide Financial. Even as Countrywide faces criminal probes, BofA seeks to withhold from Inner City Press and others its mortgage data until the Fed's comment period close on March 31. Will that deal too lack transparency?

 Fed chairman Ben Bernanke is slated to speak at 1 p.m. on Friday about the subprime consumer protection issues which the Fed for so long negligently ignored, although the speech or more likely any Q & A to follow seem likely to be cancelled. Who, however, will explain these back-room deals? Watch this site.

Update of 12:37 p.m. -- Bear Stearns has invoked copyright to prevent the broadcast of its 12:30 conference call. Note to SEC: heard of Regulation FD?

Update of 2 p.m. -- On Fed chair Bernanke's way to the podium for his speech, Inner City Press asked him if he would be taking any questions. "No," he said, remaining expressionless as Inner City Press called after him, "Bear Stearns?  JPMorgan Chase? Why?" His speech, purportedly on the subprime lending crisis, did not even mention the role of securitizers.  And when it was over, his entourage decamped in two large black cars, license plate BJ 3135, out onto D Street with siren lights on top.

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These reports are usually also available through Google News and on Lexis-Nexis.

Click here for a Reuters AlertNet piece by this correspondent about Uganda's Lord's Resistance Army. Click here for an earlier Reuters AlertNet piece about the Somali National Reconciliation Congress, and the UN's $200,000 contribution from an undefined trust fund.  Video Analysis here

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