Rep. Waxman Probes BlackRock's Role in Fed-Bear Stearns Deal

The House's investigative bulldog wants to know more about the company that is handling the $29 billion being put up by the nation's central bank to back the buyout of Bear Stearns Cos.

Rep. Henry Waxman, chairman of the House Oversight and Government Reform Committee, wrote a letter to New York Fed Governor Timothy Geithner to inquire about the selection of BlackRock Financial Management Inc. as the asset manager for the deal that allowed JPMorgan Chase & Co. to purchase Bear Stearns at bargain-basement price.

When bank managers feared investment bank Bear Stearns' collapse, the Fed put together the emergency deal to avoid a Wall Street-wide panic. Bear Stearns was hamstrung by heavy investments in shaky mortgage-backed securities.

"Only limited details are known about the Federal Reserve's understandings with BlackRock. It appears, however, that BlackRock is now directly responsible for managing a $30 billion portfolio on behalf of the American taxpayer," Waxman wrote.

"If BlackRock does its job well, the taxpayers will be made whole or even experience a gain. If BlackRock is not successful, the taxpayers stand to lose billions of dollars. In effect, it appears that BlackRock is serving as a government contractor providing complex financial services to the Federal Reserve," Waxman said.

Waxman said he wants to know how the Fed came to select BlackRock, which appears to have secured a long-term deal with the Fed without competition usually sought in a government bid. Waxman said he also wants to know more about what compensation BlackRock will receive in exchange for its work.

Geithner's "testimony before the Senate Banking Committee offered few specifics" about the deal, Waxman said.

Detailing a half-dozen specific questions about the deal, Waxman asked for a response by April 18.

FOX News' Chad Pergram contributed to this report.