Congress is up in arms about the government bailout of Bear Stearns (BSC), with two Senate panels announcing investigations into “just how the government decided to front $30 billion in taxpayer dollars for the Bear Stearns deal.”
We assume these investigations are just a pander to cash-strapped voter homeowners left for dead while the Fed and Treasury rescued Wall Street fat cats. However, it will be interesting to see what happens if this sentiment really takes hold.
Could outraged Democrats force JP Morgan (JPM) and the Fed to cut Bear Stearns loose? If so, the firm would likely immediately go bankrupt.
This outcome seems unlikely (because then Democrats would get blamed). More likely, in our opinion, the Senate grandstanding will force the Fed to also bail out homeowner constituents.