WASHINGTON - Sen. Charles Grassley, R-Iowa, last week said he plans to look into the Federal Reserve's recent action to extend a $30 billion guaranty of Bear, Stearns & Co.'s assets as part of a deal for the bank to be acquired by JPMorgan Chase & Co.
"I've instructed my staff to delve into the details of the deal," said Grassley, who is the ranking Republican member of the Senate Finance Committee. "I want to understand what the downside risk for the taxpayer is and any upside potential. I've asked staff to compare this action to recent actions by Treasury and/or the Fed to intervene in financial troubles."
Grassley's comments came after JPMorgan last week said it would pay $2 a share to acquire Bear Stearns, which was on the verge of collapse due to losses in the mortgage market and the growing credit crunch. The purchase price contrasts sharply with the $30 stock price of the company on the Friday before the Fed acted.
The senior Iowa senator also said that he is concerned that executives at Bear could receive golden parachute severance packages at the expense of employees and investors.
"Another longtime interest of mine is how insiders, such as senior executives, are treated in these kinds of deals," Grassley said. "Corporate bigwigs shouldn't be able to profit from a deal while employees, shareholders, and creditors have to carry the burden of a company's demise."