Congress Delves Into Bear Rescue

House's Waxman Focuses On Deal-Setting Precedent, Senate's'Baucus on Costs

The bones of Bear Stearns Cos. are going to be picked over on Capitol Hill as lawmakers begin examining details of the government-backed deal that rescued the investment bank from failure.

Leading members of the House and Sen­ate were kept apprised of efforts to shore up Bear Stearns last weekend as the White House and Federal Reserve scrambled to pre­vent further financial-market turmoil. But the deal is beginning to attract wider interest.

Rep, Henry Waxman, the California Democrat who leads the House Oversight and Govern­ment Reform Commit­tee, has begun making inquiries. One focus for Mr. Waxman is deter­mining whether the move sets any prece­dents for future federal Henry Waxman interventions. ------

On the other side of the Capitol, the Sen­ate Finance Committee, which has broad ju­risdiction over the U.S. economy, is ramping up for its own examination.

Among other things, the committee wants to look at the terms of the transac­tion, in which Bear Stearns is being taken over by J.P. Morgan Chase & Co. with the backing of the Fed, and the potential risk to the American taxpayers.

The inquiries underscore the strengths and weaknesses of how Congress responds to crises of the sort now roiling the financial world.

With so many members, the House and Senate are ill-prepared for rapid action. Ear­lier this year, it took weeks for Congress to approve an economic-stimulus package, even with House Speaker Nancy Pelosi, the California Democrat, and President Bush working in concert. And lawmakers have been spending months on legislation that would overhaul regulation of the housing in­dustry and help to calm the turmoil created by the meltdown in the mortgage market.

But in exerting their authority to con­duct oversight of the government, lawmak­ers can hold the White House publicly ac­countable for its handling of the mortgage crisis, and provide a forum for critics of the Bear Stearns deal to air grievances.

The inquiries will likely help to lay the groundwork for future legislation and bol­ster the case for action on Democratic ­backed measures that would more aggres­sively help troubled borrowers-a step the White House has so far resisted .

"Ultimately, Congress has a duty to re­spond appropriately to increasing bad news in the economy," said Montana Democrat Max Baucus, chairman of the Senate Finance Committee.

Aides in the House and Senate stressed that the inquiries are still at an early stage and are likely to ramp up slowly. Lawmakers are on recess for the rest of the month. Neither committee has yet decided to hold hearings.

What is attracting attention is the maneu­vering by the Bush administration and the Fed to prevent the collapse of Bear Stearns. As part of the transaction, the Fed agreed to lend $30 billion to help fund illiquid assets at Bear Stearns.

Among the questions of interest to law­makers: What should be the tax treatment of losses associated with such a deal? And what is the potential taxpayer exposure? Did the Fed's rescue ensure a better deal for Bear Stearns insiders than bankruptcy? "In­siders shouldn't be treated better than if they'd gone into bankruptcy," said Iowa Sen. Charles Grassley, the senior Republican on the Finance Committee.

A Waxman spokesman confirmed the congressman's "interest" in the deal. A Bau­cus aide said the Finance Committee is in the "examination and fact-finding stage," and plans to conduct a thorough review of the deal and the larger aspects of the admin­istration's efforts to shore up financial mar­kets. "We want to put a marker down," the aide said.