Chuck Grassley v. Linda Thomsen

Senator Chuck Grassley now alleges that he has information (from an "anonymous but specific" informant) that Linda Thomsen, the director of enforcement at the Securities and Exchange Commission, has given information to the general counsel of JP Morgan Chase, concerning the state of various SEC investigations into Bear Stearns.

You'll remember that JPM took over what was left of Bear in a shotgun wedding arranged by the federal government in March.

Apparently it was while that transaction was pending that the executives at JP Morgan became (understandably!) very interested in the regulatory/compliance questions concerning this particular pig in a poke. The general counsel of JP Morgan Chase spoke to Ms Thomsen about the matter.

Ms Thomsen (again, according to Sen. Grassley's source, not according to me!) made representations about these investigations without talking to the staff doing the investigation.

Such conduct, worries Grassley, "would reinforce the appearance that Enforcement decisions, and disclosures of information about them, are sometimes based not on the merits, but rather on access to senior officials by influential representatives of power brokers on Wall Street."

Grassley put all of this in a letter he wrote to SEC chairman Christopher Cox dated October 21 -- Tuesday.

If the charges are right, if these phone conversations did take place, what harm might have been done by Ms Thomsen's indiscretion?

Grassley's answer is that if Morgan received "inside information" in that way,m it might have been able to put together a low-ball bid to Bear and the US government.

What this seems to mean is that there may have been other potential bidders for Bear out there who were scared off by the possibility of enforcement action. But JPMorgan wasn't scared off. Presumably, its general counsel had heard something re-assuring from Ms Thomsen.

Intriguing theory. We'll have to see how this plays out.