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Dead Constitution See other Dead Constitution Articles Title: Fed Releases Details on Bear Stearns, AIG Portfolios The Fed, through its New York regional bank, also identified securities acquired in the 2008 bailout of American International Group Inc. The central bank had agreed to take on the Bear Stearns assets, including mortgage-backed securities and commercial real estate loans, to ease the investment bank’s sale to JPMorgan Chase & Co. The bailouts exposed taxpayers to potential losses on the $64.8 billion of assets, prompting Congress to propose stripping the Fed of some of its regulatory and bailout powers. As recently as March 17, New York Fed President William Dudley rebuffed a lawmaker’s request for the details, saying it would harm the central bank’s ability to maximize value to taxpayers. “The Federal Reserve recognizes the importance of transparency to its financial stability efforts and will continue to review disclosure practices with the goal of making additional information publicly available when possible,” the New York Fed said in today’s statement. The New York Fed posted the securities’ identification numbers and principal balances as of Jan. 29 on its Web site today, totaling 161 pages of documents. Previously the Fed provided values and credit ratings of groups of assets in each of the three portfolios, known as Maiden Lane LLC, Maiden Lane II LLC and Maiden Lane III LLC, named for a Manhattan street bordering the New York Fed. Legal Battle The Fed said it reached agreement on “issues of confidentiality” for the assets with JPMorgan Chase & Co., which bought Bear Stearns in 2008, and AIG. JPMorgan and AIG would incur the first losses on the portfolios. Joe Evangelisti, a spokesman for JPMorgan, and Mark Herr, a spokesman for AIG, declined to comment. WaMu’s Failure The Bear Stearns portfolio includes the types of home loans that helped bring down Seattle-based Washington Mutual Inc., which had been the largest U.S. savings and loan. The AIG assets include $247.7 million of bonds sold in March 2007 and backed by adjustable-rate mortgages written by American Home Mortgage Investment Corp. The Melville, New York-based lender filed for bankruptcy in August 2007. That debt is now rated B+, four notches below investment grade, with almost 36 percent of the underlying loans at least 60 days late and already realized losses of about 9 percent, according to data compiled by Bloomberg. About 84 percent were given to borrowers required to produce limited documentation. In the documents, the Fed excluded data on individual residential mortgages, saying disclosure would violate borrowers’ privacy. Those comprise $1.49 billion of the Bear Stearns portfolio, which was valued at $27.3 billion as of March 24. Representative Darrell Issa of California said in a statement that today’s disclosure may “signal a new willingness to cooperate with Congress as we investigate how these bailout deals were structured and what the decision making process entailed.” Fed’s Response The New York Fed has still denied or ignored other requests for information, said Issa, the senior Republican on the House Oversight Committee. Deborah Kilroe, a spokeswoman for the New York Fed, declined to comment beyond the statement. Some of the information provided by the Fed today was released by Issa earlier this year, including a five-page document itemizing the mortgage securities on which banks such as Goldman Sachs Group Inc. and Societe Generale SA had bought $62.1 billion in credit-default swaps from AIG. Bloomberg filed suit in November 2008 in U.S. District Court in New York, challenging the Fed’s denial, as well as the denial of a separate request made in May 2008, seeking records of four other emergency lending programs. The district court held that the Fed should release documents related to those four programs, and should search documents held by the New York regional bank to determine whether any of them should be considered records of the board of governors. The U.S. Court of Appeals on March 19 upheld the district court’s ruling on the lending programs.
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