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SUNDAY, NOVEMBER 22, 2009
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Fed May Have Outmuscled Other Lehman Creditors

Government creditors got their cash back; private investors still struggling

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(Newser) – A special court examiner investigating the Lehman Brothers bankruptcy is trying to determine whether the Fed used its clout to get its money back from the collapsed bank ahead of other creditors. The central bank and its New York branch lent Lehman $46 billion before the bankruptcy but was promptly paid back 100% of the loan—while dozens of other creditors remain tied up in court trying to get tens of billions in debts untangled.

Bankruptcy lawyers tell the Wall Street Journal that a ruling against the Fed would open the door for creditors to recover assets from the central bank, although the Fed may try to claim immunity from suits. Regardless of the conclusion, private investors are hoping that the investigation sheds light on a question that's worried many—just how much special treatment the government received when it became a player in the markets.

Tim Geithner, formerly head of the New York Fed and now Treasury secretary, speaks next to Ben Bernanke on Capitol Hill.
Tim Geithner, formerly head of the New York Fed and now Treasury secretary, speaks next to Ben Bernanke on Capitol Hill.   (AP Photo/Evan Vucci, File)
In this Sept. 16, 2008, file photo, people work inside the Lehman Brothers headquarters in New York.
In this Sept. 16, 2008, file photo, people work inside the Lehman Brothers headquarters in New York.   (AP Photo/Mary Altaffer, file)
Ben Bernanke and Tim Geithner, who during Lehman's collapse led the New York Fed, at a conference in London.
Ben Bernanke and Tim Geithner, who during Lehman's collapse led the New York Fed, at a conference in London.   (AP Photo/Geoff Caddick, Pool)
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3 comments
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divetrader
Oct 2, 09 10:57 AM CDT
The fed did many questionable things. They definitely should be investigated and possibly prosecuted. Reply
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IndependentThinker
Oct 2, 09 11:07 AM CDT
They NEED to prosecute just to see what the FED will do. Lets see if this private company is above the law of the nation.
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+2
GreekChorus
Oct 2, 09 1:03 PM CDT
Yet another reason to audit the Fed. Reply
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+2
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