Securities regulators refused a congressional request to disclose why they dropped an investigation into whether Bear Stearns Cos. harmed investors by improperly valuing complex debt securities, the Wall Street Journal reported today. The Securities and Exchange Commission cited confidentiality in its decision involving the late-stage probe of the Wall Street firm. At issue is a move by the SEC to abort an enforcement case into activities at Bear Stearns several months before the firm imploded in March. The firm has agreed to be acquired for a fire-sale price by J.P. Morgan Chase & Co.

Ceres Capital Partners LLC, a firm specializing in forming structured investment vehicles (SIVs), filed for chapter 11 protection yesterday saying that it was unable to operate due to the subprime credit squeeze, Reuters reported. Ceres, which is partly owned by XL Reinsurance America Inc. and Stanfield Capital Partners, organized SIVs, including Stanfield Victoria Finance Ltd., and other packaged investment products. Ceres, which filed for bankruptcy in federal court in New York, said that although its funds had “little or no exposure to subprime mortgage risks,” it was “unable to retain access to the credit markets” and was unable to find buyers for its paper. It also said it initiated discussions with lenders including XL Capital in March that allowed it to file for a “prepackaged” bankruptcy that would allow “a swift emergence” from a court-supervised restructuring.

Capco Energy Inc., an onshore and offshore gas company, filed for chapter 11 protection last week, citing $22 million in debt owed primarily to Union Bank of California, Bankruptcy Law360 reported yesterday. The company said that it owes the bank approximately $14 million, $3.7 million of which is in the form of letters of credit issued to cover ongoing operations. Capco also cited 100 to 199 unsecured creditors claiming debt up to $10 million and listed up to $10 million in assets. Capco said its largest unsecured debt of approximately $2 million was to Hoactzin LP, who joined Capco in acquiring various oil properties. The company also cited $8 million of trade debt to vendors for goods and services.

Critics are worried that the Securities and Exchange Commission is losing its bite amid the recent financial crisis, the New York Times reported today. Wall Street and the broader business community have pushed aggressively in recent years to roll back regulation, arguing that the United States is losing its competitive edge. “There has been less emphasis on investor protection and more on this issue of the competitiveness of markets,” said Sen. Jack Reed (D- R.I.). In March, Reed and Senate Banking Committee Chair Christopher J. Dodd (D- Conn.) asked the Government Accountability Office to look into the penalties that the SEC has been levying recently. Penalties, together with the return of ill-gotten gains, fell by half in the 2007 fiscal year, to $1.6 billion. Staff lawyers in the SEC enforcement division say high turnover, tight budgets and a new, looser attitude toward corporate wrongdoing are sapping morale. The staffing and budget of the SEC have lagged far behind the explosive growth of the markets the commission must police.

Federal Reserve Chairman Ben S. Bernanke will face questions at a congressional hearing today over the central bank’s role in JPMorgan Chase’s absorption of the investment firm Bear Stearns and accepting $30 billion worth of questionable mortgage-related assets as collateral for a Fed loan that enabled the deal, the New York Times reported. “There’s a lot of concern that this was done ad hoc,” said Joint Economic Committee Chairman Charles E. Schumer (D-N.Y.), whose committee will hold the hearings today. Senate Banking Committee Chair Christopher J. Dodd (D-Conn.) has also signaled that at his panel’s hearing tomorrow that he will ask Bernanke about Bear Stearns and why the financial sector’s problems were allowed to fester.
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