Bear Stearns' CEO Alan Schwartz told the U.S. lawmakers that the firm may not have failed if the Federal Reserve had opened its discount window to investment banks earlier.
During the testimony to Senate Banking Committee, some experts had suggested that the Fed could have opened the discount window when fears first emerged about the health of Bear Stearns instead of doing it immediately after the deal.
"It was not at all obvious to me it would have been sufficient to prevent their bankruptcy," said Fed chief Ben Bernanke.
Disagreeing with Bernanke's remarks, Schwartz commented, "It's my strong belief that by every measure that I can think of that our balance sheet, our capital ratios, our risk profile lined up well with all of our leading competitors."
"So I do believe that if as a policy measure the discount window had been open to investment banks for their high-quality collateral, I think it's highly, highly unlikely in my personal opinion that we'd be in the position that we find ourselves in today."
Schwartz's comments appeared to also contradict New York Federal Reserve Bank President Timothy Geithner, who said that he would have been "very uncomfortable lending to Bear, given what we knew at that time, if you could walk back the clock and think about what would happen if that facility had been in place before."
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During the testimony to Senate Banking Committee, some experts had suggested that the Fed could have opened the discount window when fears first emerged about the health of Bear Stearns instead of doing it immediately after the deal.
"It was not at all obvious to me it would have been sufficient to prevent their bankruptcy," said Fed chief Ben Bernanke.
Disagreeing with Bernanke's remarks, Schwartz commented, "It's my strong belief that by every measure that I can think of that our balance sheet, our capital ratios, our risk profile lined up well with all of our leading competitors."
"So I do believe that if as a policy measure the discount window had been open to investment banks for their high-quality collateral, I think it's highly, highly unlikely in my personal opinion that we'd be in the position that we find ourselves in today."
Schwartz's comments appeared to also contradict New York Federal Reserve Bank President Timothy Geithner, who said that he would have been "very uncomfortable lending to Bear, given what we knew at that time, if you could walk back the clock and think about what would happen if that facility had been in place before."
Story contributed by MarketWatch: Read More
