NEW YORK – The Federal Reserve, which prides itself on never having lost a dime on a loan it made, is sitting on almost $1 billion of debt in a hotel chain that filed for bankruptcy court protection.
The disclosure of that surprising news came not from the central bank, but from this week's bankruptcy filing by Extended Stay Hotels. It listed an entity controlled by the Fed as the company's third-largest creditor, an investment it reluctantly inherited after the collapse of Bear Stearns last year.
For the Federal Reserve, which has pledged to be more forthcoming about how hundreds of billions of dollars of its funds are being used to bail out the financial system, this lack of transparency is troubling.
It's also a sobering reminder to members of Congress, some of whom are already questioning the Obama administration's proposal to boost the power of the U.S. central bank as part of a broad overhaul of the financial regulatory system.