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By the very low bar of past performance, Thursday’s Senate Banking Committee on the Bear Stearns (NYSE:BSC) inferno was well worth watching. The politicians managed to keep their grandstanding to a minimum and even managed an intelligent question or two; the defendants (Is that right?—Ed) actually answered some of the questions, although the chatter about the need for transparency didn’t actually extend to providing much about the quality of the collateral, or the role that Goldman South Treasury played in setting the takeout price.

The most telling moment for me came when committee chairman Christopher Dodd (D. Conn) recalled a conversation with Bear Stearns chief executive Alan Schwartz in Aug. 2007. Dodd, doubtless begging for campaign contributions, apparently stopped talking long enough—and anybody who’s been in the same room as Senator Forehead (© Jeff Matthews) knows that wasn’t long—for Schwartz to say that investments banks should have access to Federal Reserve’s discount window. Which tells me at least three things:

  1. Schwartz has been, despite all the happy talk in the earnings releases and television appearances, a worried man for a long time.
  2. Despite those concerns, Bear Stearns made little effort to raise capital (see Lehman Bros (LEH), last week). And
  3. It was suicide, not homicide.

Turmoil in U.S. Credit Markets:
Examining the Recent Actions of Federal Financial Regulators
Senate Banking Committee
Apr. 4 2008