SEC, Fed plan to share more data

The Securities and Exchange Commission plans to share more information with the Federal Reserve about the health of investment banks after a run on Bear Stearns Cos. put the firm on the brink of filing for bankruptcy.

The SEC and the Fed are preparing a “memorandum of understanding” for communicating with each other, Erik Sirri, head of the SEC’s trading and markets division, said in Senate testimony Wednesday.

The effort reflects the fact that the central bank is lending money to investment banks for the first time since the Great Depression, he said.

The memo “would provide an agreed-upon scope and mechanism for information sharing,” Sirri told members of the Senate subcommittee on securities, insurance and investment. The goal is “making it more useful and more clear,” he said.

Congress is examining the SEC’s role as the primary regulator for investment banks after the Fed helped rescue Bear Stearns in March by agreeing to lend it money and then orchestrating a sale to JPMorgan Chase & Co.

The SEC and Fed now share oversight of securities firms.

Sen. Jack Reed (D-R.I.), who heads the Senate panel, said the SEC’s monitoring didn’t “adequately measure the risk of new products,” such as securitized loans that investment banks held and were sold to investors.