Bear eats Fed
The saying "chickens coming home to roost" is believed to be more than half a millennium old. That's a pretty long time to not learn a lesson...for an entire species. I remember going to a birthday party when I was 5-ish, one youngin' pooped himself and tried to hide the skidmarkers beneath the carpet. It didn't work out well for him. Years later, I hear he's in therapy due to severe anxiety brought about by chronic constipation.
Perhaps one of these days, we'll learn from our mistakes. This futures contract from hell suggests otherwise.
Apparently, the NY Fed is struggling to pay off that $29 billion loan secured by Bear Stearns assets. The Bear assets were acquired for $30 billion in March 2008 had a value of $29.4 billion as of June 30, 2010. The portfolio's value had dropped to about $25 billion during the depths of the financial crisis and now the Fed faces a likelihood of foreclosing on numerous residential and commercial properties over the coming months.
The real estate holdings are hampering the portfolio most. The assets, valued at $9.6 billion (as of March 2008) were recently re-evaluated at around $5 billion.
This tangled bundle of stucco and particleboard is now the plaything of Maiden Lane LLC, the NY Fed's personal SIV created to manage the portfolio. The Fed then brought in BlackRock to puppeteer their G-monkeys for a fee of $35 million, this is $5 million more than Maiden Lane's first principal payment mid-way through July.
Not many were shocked when JP Morgan Chase refused to take on the heinous $30 billion Bear portfolio of real-estate loans and securities. Many were quick to point out that bringing this largely underwater portfolio on to the Fed's balance sheet would effectively pass the penalties on to the tax payer.
Well...the Bear is back. Badder than ever. Except this time he is that chicken coming home and for those of us who own property, pay our mortgages on time and generally live life as it should be lived (in the fiscal sense)...it is time to roast.
I bet Cramer is buying heavy.
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