As Lehman Brothers careened toward bankruptcy in 2008, the New York Federal Reserve Bank came to its rescue, sopping up junk loans that the investment bank couldn't sell in the market, according to a report from court-appointed examiner Anton R. Valukas. The New York Fed, under the direction of now-Treasury Secretary Tim Geithner, knowingly allowed itself to be used as a "warehouse" for junk loans, the report says, even though Fed guidelines say it can only accept investment grade bonds. (HuffPo Link)There you have it. Geithner was aiding and abetting illegal activity and assisting Richard Fuld - who was a on the board of directors of the NY Fed at the time - in hiding the full extent of Lehman's insolvency. Geithner should immediately be fired and all of his email accounts, phone records and files from the NY Fed and his office at the Treasury should be seized. He needs to be investigated.
The other, bigger issue, as raised by the HuffPo article, is to what extent is the entire Federal Reserve system hiding toxic assets. This isn't just related to Lehman and this is one of the main reasons that Bernanke and Geithner vigorously oppose all Congressional attempts to force an audit of the Fed (Bernanke's Fed is spending millions to fight this):
Without an audit, the Fed is able to conceal the specifics of what it holds on its balance sheet. If the Lehman deal is any indication, the Fed is hiding billions of dollars in toxic loans on its books. "The Fed legally is forbidden from taking such assets. There's a legal requirement that the Fed's assets be investment grade," Rep. Alan Grayson (D-Fla.) told HuffPost.This will continue and get worse until either the system collapses under the sheer weight of the fraud and corruption or the Fed continues to cover-up the fraud by hyperinflating the currency. I guess we ultimately collapse either way. The least Obama could do is throw us a bone and get rid of Geithner.