Craig Torres, Bob Ivry and Scott Lanman
April 1, 2010
After months of litigation and political scrutiny, the Federal Reserve yesterday ended a policy of secrecy over its Bear Stearns Cos. bailout.
In a 4:30 p.m. announcement in a week of congressional recess and religious holidays, the central bank released details of securities bought to aid Bear Stearns’s takeover by JPMorgan Chase & Co. Bloomberg News sued the Fed for that information.
The Fed’s vehicle known as Maiden Lane LLC has securities backed by mortgages from lenders including Washington Mutual Inc. and Countrywide Financial Corp., loans that were made with limited borrower documentation. More than $1 billion of them are backed by “jumbo” mortgages written by Thornburg Mortgage Inc., which now carry the lowest investment-grade rating. Jumbo loans were larger than government-sponsored mortgage buyers such as Fannie Mae could finance — $417,000 at the time.
“The Fed absorbed that risk on its balance sheet and is now seen to be holding problematic, legacy assets,” said Vincent Reinhart, a resident scholar at the American Enterprise Institute in Washington who was the central bank’s monetary- affairs director from 2001 to 2007. “There is both an impairment to its balance sheet and its reputation.”
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