[Congressional Record (Bound Edition), Volume 154 (2008), Part 4]
[Senate]
[Page 5694]
[From the U.S. Government Publishing Office, www.gpo.gov]




                            INSIDER TRADING

  Mr. TESTER. Mr. President, I rise today to discuss the recent 
acquisition of Bear Stearns by JPMorgan Chase and the events that 
caused the downfall of one of our largest investment banks and its 
eventual merger with JPMorgan Chase.
  When I first learned of the merger, I urged Chairman Dodd to hold a 
hearing. Last week, the Banking Committee began to exercise its much-
needed oversight role on this deal. The hearing served to shine a 
spotlight on the actions of the Federal Reserve and the Treasury 
Department.
  Over the past 2 weeks, we have learned much about the events that led 
up to Bear Stearns demise and how the government interceded to save it. 
Unfortunately, some of the accounts have raised more questions than 
answers. Congress must continue to look into this deal and possible 
illegal behavior.
  Mr. President, I am calling on the proper law enforcement authorities 
to investigate whether illegal insider trading may have fueled Bear 
Stearns' downfall.
  In the days, hours and, ultimately, minutes before news of Bear 
Stearns became public, it appears trading in Bear Stearns' stock jumped 
substantially.
  Volume trading in shares of Bear Stearns jumped from just over 5 
million shares on the first day of trading in March to an astronomical 
186,986,900 shares on March 14--2 days before the Fed authorized the 
$29 billion bailout. Let me say that one more time. Volume trading in 
shares of Bear Stearns jumped from just over 5 million shares on the 
first day of trading in March to an astronomical 186,986,900 shares on 
Friday, March 14. In fact, the previous high in volume over the last 
year was just over 28 million shares. Yet on March 14, shares of Bear 
Stearns were traded nearly 187 million times. They were traded at 
nearly 187 million times.
  It is uncertain whether or not rampant fears of the company's demise 
led to that spike or whether those looking to make a buck engaged in 
illegal market manipulation.
  During the hearing last Thursday, I asked SEC Chairman Cox if he was 
aware of any evidence suggesting that speculators had bet heavily that 
Bear Stearns' share price would fall, known on Wall Street as ``short 
selling.''
  Chairman Cox responded: ``I'm a little bit constrained because the 
SEC is in the law enforcement business.'' He stated that SEC pursues 
insider trading aggressively and said his agency was mulling ``several 
law enforcement matters'' that had not been filed in any U.S. court.
  Today, I will be sending this letter to Chairman Cox, as well as 
Attorney General Mukasey, calling on them to immediately and thoroughly 
investigate the role that short-selling played in the events 
surrounding Bear Stearns' collapse.
  Market manipulation is illegal and must be prosecuted to the fullest 
extent of the law. I am asking that Chairman Cox and Attorney General 
Mukasey to respond to me and the Senate Banking Committee with a report 
as early as possible about this investigation.
  The American taxpayers have been asked to carry the burden of a $29 
billion loan that is linked to possibly risky mortgage backed 
securities. In fact, JPMorgan Chase would not have agreed to acquire 
Bear Stearns had the government not shared the risk.
  I want to repeat that one more time--one of the world's largest and 
most respected investment banks would not carry the full risk without 
government aid. And we are supposed to believe on blind faith that the 
investment is safe and will be repaid in full?
  Knowing the consequences and the burden is being carried not only by 
shareholders, but by average taxpayers who live paycheck-to-paycheck, 
we must learn if the Federal Reserve acted properly.
  We must be certain that investors did not violate laws barring 
speculators from engaging in market manipulation or insider trading. We 
must be certain that the taxpayers did not post a preemptive bailout to 
cover massive short selling for those to make money in the markets.
  I rose on the floor last week to raise my concern for the families in 
Montana and the rest of the country who work hard and play by the 
rules; yet, can't find a decent place to live that they can afford. And 
for communities throughout rural America where opportunity is slipping 
away because of the failure of the national leadership to invest in 
basic infrastructure that connects us to one another.
  These families cannot be asked to cover what some are calling a 
Government bailout when they are having hard time filling their truck 
with diesel and to save for their kid's college fund.
  I look forward to hearing back from the SEC and Department of 
Justice. I hope they tell me that it was fear and nothing but market 
dynamics and not illegal trading. I hope they will tell me that the $29 
billion loan was justified and was a one-time act to prevent an 
economic meltdown.
  But if there was insider trading and market manipulation, the proper 
law enforcement authorities of the U.S. government must respond with 
appropriate action and prosecute any wrong-doing to the fullest extent 
of the law.
  Thank you, Mr. President. I yield the floor.
  The ACTING PRESIDENT pro tempore. The Senator from Florida is 
recognized.
  Mr. NELSON of Florida. Mr. President, we are in morning business, is 
that correct?
  The ACTING PRESIDENT pro tempore. That is correct.

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