Sunday, August 08, 2010
When the Federal Reserve Bank of New York helped bail out Bear Stearns two years ago, it didn’t anticipate becoming the bad guy and having to foreclose on American homeowners and business owners. But that’s the ugly situation facing the New York Fed, as Bear Stearns real-estate holdings have dropped considerably in value.
Of the $30 billion it put out to rescue Bear Stearns, the most powerful of the Fed regional branches is sitting on a collection of about 9,000 residential loans and 50 commercial real estate loans that have plummeted in value, from $9.6 billion in 2008 to $5 billion currently.
The Fed has never in its nearly 100-year history made or controlled loans to U.S. citizens and businesses, except during the Depression of the 1930s, and even then it was on a much smaller scale. Now, Fed officials must deal with being the banker that’s threatening to kick Americans to the curb and shut down small businesses.
-Noel Brinkerhoff
Foreclosed On—By the U.S. (by Serena Ng and Carrick Mollenkamp, Wall Street Journal)
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