Posted on his own website a few days ago,

Rep. Scott Garrett (R-NJ) called for answers in response to the reported value of the Bear Stearns portfolio released by the New York Federal Reserve today at 4:30pm. Garrett, a member of the Financial Services Committee, will be among those questioning Treasury Secretary Henry Paulson and Federal Reserve Board Chairman Ben Bernanke on Thursday, July 10 at 10:00am.

“The Fed’s action in bailing out Bear Stearns sets a precarious standard,” Garrett said. “This unprecedented expansion of authority without congressional approval exposes taxpayers to tremendous financial risk. Like most Americans, I want market discipline – but the Federal Reserve cannot create that by fabricating new regulatory authority.”

Garrett also criticized House Financial Services Committee Chairman Barney Frank (D-MA) for the delay in holding hearings into the incident. With the support of 23 other members, Garrett sent a letter to Frank requesting a congressional hearing, a request that was largely ignored for three months. It was only recently that Frank scheduled committee hearings to explore the potential systemic risk associated with the Fed’s actions. In the statement released by the House Financial Services Committee on Wednesday, Frank announced that the committee would explore the adequacy of current oversight and regulatory tools.

“Our nation’s hardworking taxpayers have been put on the hook for Bear Stearns’ collapse. They deserve a thorough explanation of the Fed’s rationale for the bail-out, as well as a solid plan for how the Fed will deal with future instances of this nature,” Garrett said. “While it is important that the government work closely with industry to ensure the stability and liquidity of our nation’s financial markets, we must be cautious about encouraging further risky business decisions by using government tools to prevent the free market from acting appropriately.”

An audio link of Garrett’s questions and Federal Reserve Chairman Ben Bernanke’s answers here.

Transcribed / paraphrased text on the other side of the jump…

For those too busy to listen to the 2 minute clip, a quick transcription of the Congressman’s questions are as follows:

1 - Can you assure us that you will not conduct any similar Bear Stearns transaction if another investment bank or GSE gets in trouble without the prior explicit authorization of Congress via enabling legislation?

2 - If you decide that there is no alternative than to conduct another bailout or support, however you want to call it, to one of these troubled organizations, will you be willing to monetize the debt to finance such a transaction due to the current limitations to your balance sheet?

3 - Your claim that your actions with Bear Stearns transactions are granted to your under section 13 of the Federal Reserve act, are their any limitations within that section or elsewhere as to your abilities subject going forward to deal with these situations?

Bernanke nervously stutters out a response, paraphrased:

1 - I was in touch with Congressional leaders over the weekend vis-a-vis Bear Sterns, there was no sense that I shouldn’t be pursuing it. Actions were reached by consensues with the Treasury, SEC, other authorities, and these actions were necessary. I don’t think [another crisis / bailout] situation is at all likely.

2 - There is no monetization, this is a sterilized operation, there is no effect on the money supply. *We are just lending* we didn’t *purchase* anything. :: BARNY FRANK INTERRUPTS — RUT ROH, TIME IS UP! :: It doesn’t affect the money supply, we have plenty of balance sheet room left.

With the Fed chairman squirming and even lying (about everything in bold), Frank moves on, leaving question three unanswered. Perhaps bile has news on Congressman Ron Paul’s Q&A?

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