The Federal Reserve finally opted for a little transparency with some of the trillions it’s put us on the hook for to bail out the financial industry. How many newspapers covered it?
And what did we find out? That the Fed gobbled up $74 billion in assets from the collapsing Bear Stearns and AIG and racked up nearly $10 billion in losses on them by the end of the year. You can be sure the losses now are much higher.
The financial wire services covered it yesterday, with Bloomberg doing best, probably because the reporter, Mark Pittman, has been aggressively covering this angle for months and Bloomberg has sued the Fed to force it to disclose what collateral it has accepted in exchange for its trillions of dollars in loans to Wall Street and the banks. That’s probably a good part of why we have this bit of transparency at all.
Pittman quotes Chris Whalen of Institutional Risk Analytics saying the losses mean there’s going to have to be another government bailout—this time of the Fed itself:
“The numbers basically confirm that Treasury is going to have to take some TARP money and reimburse the Fed,” said Whalen, whose financial-services research company analyzes banks for investors. “It is essentially up to the Treasury to get the Fed out of this.”
Reuters misses the headline numbers—the $9.6 billion in losses and the $74 billion in total assets assumed—and misses the AIG part of the story entirely.
Dow Jones Newswires gets AIG in there, but makes its readers add up the total losses themselves—if they made it far enough into the article to even learn about the Bear/AIG news.
And, boy, that $74 billion in assets we got looks like one big flaming pile. Bloomberg:
Maiden Lane I is a $25.7 billion portfolio of Bear Stearns securities related to commercial and residential mortgages. JPMorgan refused to buy them when it acquired Bear Stearns to avert the firm’s bankruptcy.
Maiden Lane II contains almost $11 billion of outstanding subprime mortgage-backed securities from the AIG transaction that the Fed said lost $180 million so far. The fund also contains $6.2 billion of Alt/A adjustable-rate mortgage-backed securities that the report said has $936 million of unrealized losses.
Maiden Lane III? Loaded with collateralized debt obligations.
So again we circle around to why the major newspapers didn’t see this fit to even brief (if you dig deep enough on the Journal’s and the Washington Post’s websites, you can find wire stories. I don’t have an answer for that other than maybe they’ve become inured to losses of “only” $10 billion.
They ought to be pushing any glimmer of transparency they can get.
UPDATE: The FT’s Alphaville blog takes note of the disclosures.