Reply #31: New York Fed Faces `Inherent Conflict' in Mortgage Buybacks [View All]

[Demeter]

http://www.bloomberg.com/news/2010-10-21/new-york-fed-faces-inherent-conflict-in-seeking-to-recover-mortgage-loss.html

The Federal Reserve Bank of New York’s effort to recover taxpayer money used in bailouts during the crisis may be at odds with its mission to ensure the stability of the financial system.

The New York Fed, which acquired mortgage debt in the 2008 rescues of Bear Stearns Cos. and American International Group Inc., joined a bondholder group including Pacific Investment Management Co. that aims to force Bank of America Corp. to buy back some bad home loans packaged into $47 billion of securities..

“This is an inherent conflict,” said former Atlanta Fed research director Robert Eisenbeis, now chief monetary economist at Cumberland Advisors Inc. in Sarasota, Florida. “They’re transferring the loss from what would have been Bear Stearns through the Fed to the originators of the mortgages. That’s an odd chain, and I don’t know how you manage that.”

SMOKE AND MIRRORS, AND A BIG TAXPAYER FUNDED BAILOUT, WOULD BE MY GUESS..