The Federal Reserve, and by that I mean you and me, owns quite a bit of interesting things these days. Most of it is worth pennies on the dollars that the Fed bought it for.
As part of the bailouts of AIG and Bear Stearns, the Federal Reserve Bank of New York spent more than $70 billion to buy toxic assets the companies owned. Last week, prompted by a lawsuit filed by Bloomberg News, the Fed finally told the world exactly what it bought.
The Fed now owns loans to Hilton hotels in Hawaii, Puerto Rico, Malaysia and Trinidad. It owns loans to the Miami airport, and the Civic Opera House in Chicago.
It also owned a loan to Crossroads Mall in Oklahoma City. Then, when the owners of the mall couldn't make the payments, the Fed foreclosed. So now it owns the mall, which includes a Chick-fil-A and an AMC theater.
The mall's for sale — cheap! "This lender owned distressed asset ... can be purchased at far below replacement cost," the listing says.
The Fed also owns credit-default swaps — basically, insurance policies that pay off if a borrower defaults on a loan. It holds swaps on the debt of Florida schools, and on debt owed by California and Nevada. So the Fed would profit if one of those states defaulted on its debt.
It's bad enough that the Fed owns all these toxic assets, but I find it especially disturbing that it owns credit default swaps that would allow it to profit on the failure of certain state governments.