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Here Comes the Hearing

In the wake of the Bear Stearns crash this month, most economic prognosticators agree that the Federal Reserve’s move to swoop in and bail out the near-bankrupt investment firm was a sound move for the country’s economy. The Fed, after all, is the lender of last resort, and as the recent crisis has revealed, the Bear was so entwined in the tangled web that forms the nation’s financial infrastructure that its singular demise might have toppled other banks and markets.

That being said, the bailout (as Mary Kane pointed out earlier this week) is now finding its criticisms — not so much for what Washington has done for the Bear, but for what it hasn’t done simultaneously to help homeowners who now face foreclosures as a result of the dubious loans the Bear and others were pushing.

Reinforcing that argument is none other than Robert E. Rubin, former Treasury Secretary and now director of Citigroup, which Forbes deemed the largest public company in the world last year. Here’s Rubin on Bloomberg’s “Political Capital” show last Friday:

I think the Treasury working with the Fed did the right thing conceptually on Bear Stearns, and rescuing Bear Stearns. The place that hasn’t been addressed, the issue that hasn’t been addressed, are all these mortgages that are troubled, the mortgages that are facing disclosure…

Not all of them can be saved, but that problem is still very large and still very much at the heart of the issues that are affecting the credit markets.

Congress is getting into the scrutiny business as well. Yesterday, Senate Finance Committee leaders Max S. Baucus (D-Mont.) and Charles E. Grassley (R-Iowa) announced plans to investigate the details of the deal to ensure that it was fair to taxpayers.

Sen. Christopher J. Dodd (D-Conn.) has gone a step further, scheduling an Apr. 3 hearing to examine how the bailout came to be. Witnesses will include Treasury Secretary Henry M. Paulson, Fed Chairman Ben S. Bernanke, Bear Stearns CEO Alan D. Schwartz and JP Morgan Chase CEO James L. Dimon.

Arrive early. That one’s sure to be standing room only.

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