"Depending on what the commission finds, this may lead to a broader inquiry into short selling by the SEC and Congress," Rep. Barney Frank, a Massachusetts Democrat, said in a statement.
WASHINGTON (Reuters) - The chairman of the U.S. House Financial Services Committee on Friday urged the Securities and Exchange Commission to broaden its probe of questionable trading in Bear Stearns' <BSC.N> shares to include trading activity in shares of all the large investment banks.
"Depending on what the commission finds, this may lead to a broader inquiry into short selling by the SEC and Congress," Rep. Barney Frank, a Massachusetts Democrat, said in a statement.
Senate Banking Committee Chairman Christopher Dodd and the CEO of Bear Stearns, Alan Schwartz, have already asked the SEC to investigate whether illegal short selling contributed to Bear's collapse.
"There are strong indications of similar market activity in the stocks of other major investment banks," Frank said in an April 4 letter addressed to SEC Chairman Christopher Cox.
!ADVERTISEMENT!"Some allege this was a coordinated activity on the part of various market participants -- who also pushed rumors the banks were in trouble -- in an effort to drive share prices down," the letter said.
Short sellers borrow shares they consider overvalued and sell them. If the price drops, they repurchase the shares, return them and pocket the difference.
The SEC has not said whether it is probing Bear's trading activity but at a Senate hearing on Thursday Cox said the agency takes "very seriously its responsibility to investigate allegations of this kind."
During the week of March 10, Bear stock dropped precipitously amid rumors it was running out of money.
Bear has since agreed to be bought by JPMorgan Chase <JPM.N> for $10 a share.
(Reporting by Karey Wutkowski and Rachelle Younglai; Editing by Brian Moss)
