"One of the key things we want to know in the market is what kind of hair cut did you (the Fed) take on the securities and how could we be sure these securities you took in are valued at what you believe they are valued at," said Tony Crescenzi of Miller Tabak.
"We want to hear the Fed did all its homework ... just so we can feel a bit more comfortable about the the idea of the Fed taking on this other collateral," he said.
I would add we also want to know exactly what brought Bear down and could its failure have been avoided? Did the downgrade to its credit rating give Bear the final push or was it the concerted work of hedge funds and others who were stepping away from the firm as shorts swarmed its stock? Why did J.P. Morgan reverse course and up the initial $2 per share bid to $10 per share?
Why did Bear CEO Alan Schwartz tell investors the firm was ok when he appeared on CNBC just the day before it teetered on bankruptcy? Is this a sweetheart deal for J.P. Morgan or a headache for one of Wall Street's most admired CEOs?
This drama has provided plenty of fodder for conspiracy theorists who question whether the Fed's a regulator gone wild, acting on behalf of Wall Street, not Main Street. But the other side of the story is it appears the Fed had no choice. Ironically, its rescue plan has calmed the markets to the point where investors feel comfortable enough to take shots at its decision.
Crescenzi, who watches the Fed closely, said he thought Bernanke handled the Bear Stearns issue well in his first round with Congress Wednesday. "The questions about it were fielded well, and there was no further inspection or interrogation of Bernanke or his own answers on the Bear Stearns issue, which means he gave on point answers."
I spoke Wednesday with former SEC Chairman William Donaldson both about Bear Stearns and Treasury Secretary Hank Paulson's plan for a new regulatory structure for the markets. Donaldson is also a former New York Stock Exchange chairman and was founder of the one time Wall Street firm, Donaldson Lufkin Jenrette.
First, he believes the Fed made the right decision about Bear Stearns. But he says before the Fed is granted authority over the Wall Street firms that can now tap its window, a thoughtful study needs to be conducted on what went wrong, how it happened and what type of structure the financial markets need to prevent it from recurring.
He said the Paulson plan was a first step but it was lacking that type of backup. ""What needs to be done is eventually along the lines of what Paulson is suggesting, a total rearrangement ... before that's done I think there needs to be an examination of who did what to whom," he said.
Donaldson also predicts that whatever regulatory structure is ultimately adopted will not come during the current Administration and will be stricter than the Paulson plan in its regulation of Wall Street. "We have all these structures to make sure the firms don't get into trouble again, but what about the investor protection aspects of what the SEC's mission is and number, two, what about the oversight of all the instruments that caused all of this ... the whole panoply of instruments that are out there."
On the Markets
The Dow mostly slid to the side in Wednesday's trading. It closed down 48 at 12,605, while the S&P was down 2.65 points at 1367.53.
Scott Redler of T3 Capital says the market may be setting up to break out of its downtrend, started in October.
"If after a few days of sideways trade, we could hold above the 1345 to 1355 on the S&P 500 that would show demand for stocks in the upper end of a new range and eventually give us a platform to break the trend of lower highs that has been controlling this market," he said.
"Right now technicians are looking for the trend to break. People are making a lot of money shorting rallies and buying big dips. If all of a sudden we have a shallow dip and we can go sideways we might be able to turn higher and finally break the trend of lower highs, which would cause another round of short covering and ignite a move to higher levels," he said.
In other markets, the dollar weakend and oil and other commodities rose. Gold gained $12.30 per troy ounce to $895.20.
Oil rose $3.85 per barrel or 3.8 percent to $104.83 per barrel. Gasoline for May delivery rose 13.44 cents per gallon, or 5.1%, to settle at $2.7736, a NYMEX record. Oil and gasoline moved sharply on a gasoline inventory report.
"With today's inventory report, the robust supply cushion for gasoline appears to be vanishing before our eyes," says John Kilduff, senior vice president at M.F. Global. "With refiners sustaining operating rates below 85 percent, this trend will likely accelerate given the expected increase in seasonal gasoline demand."
Kilduff, a CNBC contributor, said gasoline holds sway over the prices in oil markets this time of year. He says gasoline prices at the pump may now be on the road to a national average in excess of $3.50 per gallon in the next couple of weeks.
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