WASHINGTON — The Federal Reserve Board on Thursday said the value of the assets it took from Bear Stearns Cos. in March lost more than $2 billion during the third quarter, lending weight to critics who claim the central bank's rescue may end up costing taxpayers.
The Fed said the Bear Stearns assets — originally worth $29 billion — were valued at $26.8 billion on Sept. 30.
Though the loss could be turned around in future quarters, it is likely to fuel questions over whether taxpayers will ultimately be left holding the bag. Federal Reserve Board Chairman Ben Bernanke has argued that the assets could ultimately turn a profit.
"I think we got a good deal," he told the Senate Banking Committee in April. "Our advisor suggests that we have collateral that is worth as much or more than our loan."
The Fed's intervention helped sell Bear Stearns to JPMorgan Chase & Co., which agreed to absorb the first $1 billion in losses.
The lower asset value was disclosed in the Fed's weekly summary of its balance sheet. The report separately said that commercial bank borrowing through the discount window reached a new high of $107.5 billion on Wednesday, a 5.6% increase from a week earlier. But overall lending through the discount window fell after posting five straight weeks of records. Total borrowing dropped 7.5%, to $408.1 billion.
The highest level of borrowing — $107.9 billion — was through a program that purchases asset-backed commercial paper held by money market mutual funds. That was a 12.1% drop from a week earlier.
The Fed announced a new program Tuesday that would buy unsecured commercial paper from the funds but that program has not yet begun.
Another $102.4 billion was issued to investment banks through the primary dealer credit facility, down 23.5% from a week earlier. Though major standalone banks no longer exist on Wall Street, the facility helps Goldman Sachs and Morgan Stanley, which are now bank holding companies, and the investment bank units of commercial institutions.
The central bank also said it distributed $90.3 billion to American International Group Inc., the insurance giant bailed out by the Fed last month. That was up 9% from last week.
The AIG support includes an $85 billion loan as well as investment-grade, fixed-income securities the central bank agreed to borrow. The Fed does not break down how its support of AIG is split between the loan and the securities borrowing.
