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NYT Highlights ‘Rich’ Who Got Fed Loans

More on the Fed’s bailouts, once again discreetly buried in the ‘Economy’ section of the New York Times:

Cross Section of Rich Invested With the Fed

December 2, 2010

WASHINGTON — One investor, Kenneth H. Dahlberg, is a World War II flying ace who, as a volunteer in President Richard M. Nixon’s re-election campaign, was a minor figure in the Watergate scandal.

The Times should give itself a gold star for managing to highlight a Republican from the hated Nixon era in their lede paragraph.

Another investor, Magalen O. Bryant, runs a horse farm in Virginia and is active in steeplechase racing circles. A third, Ward W. Woods, is the chairman of the nonprofit organization that runs the Bronx Zoo.

They were among scores of wealthy but lesser-known investors in an emergency lending program the Federal Reserve announced in November 2008, three weeks after President Obama’s election, to support the market for student, auto, credit card and small-business loans.

Once again, The Times does its best to mislead the reader into thinking that this is Republican scandal. Never mind that all of these loans were given out during the Obama administration.

The investors, whose identities were disclosed as part of a trove of 21,000 records released on Wednesday at the direction of Congress, are a cross-section of America’s wealthy — investors who, in the midst of the worst financial crisis since the Great Depression, heard about an opportunity and weighed the risk.

"An opportunity" that the rest of us — who were the ultimate lenders — are only hearing about now, now that the midterm elections are safely behind us.

The list, not surprisingly, includes famous Wall Street financiers like J. Christopher Flowers, John A. Paulson and Julian Robertson, demonstrating the extent to which the Fed relied on fast-moving hedge funds to keep credit flowing through the markets.

There were also institutional investors like the Ford Foundation and the pension plan for Major League Baseball. And there were wealthy businessmen like the computer executive Michael S. Dell and the home builder Bruce E. Toll.

Notice how the New York Times is refraining from mentioning the political persuasion of most of the recipients of these taxpayer loans.

Investors like Mr. Dell are identified in the Fed’s data because they owned or were part of a group that owned a “material” stake in a company or a fund that received funding from the Fed. They may not have been involved in the decision to borrow from the Fed

Despite this disclaimer, Michael Dell is highlighted by The Times because he is known to support Republicans.

The program, which began in March 2009, ended June 30, 2010; two-thirds of the loans have been repaid early. The remaining ones come due as late as 2015. The Fed has said it does not expect to lose any money in the program.

As we noted above, The Times did their best to make it sound like these loans were made during the Bush presidency, when in fact they were made during the Obama administration.

The investors put up their own money in return for Fed financing that was then plowed into the markets for securitized loans — bundles of credit card or auto dealership debt and student loans. The investors shouldered the risk that the loan packages could lose value and be worth less than the amount they had borrowed from the Fed.

Gosh, how heroic of them.

Ordinarily, bundles of loans of this type are not difficult to sell, but after Lehman went bankrupt in September 2008, the market for such debt suddenly froze. The point of the program was to keep money moving through the markets while having investors, not the Fed, bear the risk.

Mr. Dahlberg was one such investor. The newly disclosed records show he was an investor in Broad Creek Partners, which borrowed $28.1 million from the Fed, through TALF, to purchase a portion of a security issued by GE Capital, the financing arm of General Electric. The security was backed by subprime credit card loans. To obtain the loan, Broad Creek pledged as collateral the market value of the security, $30.5 million…

Nearly all of some two dozen TALF investors contacted on Thursday declined to comment or did not respond to messages.

One who did agree to talk was Dov C. Schlein, a former president of the Republic Bank of New York, who estimated that he made a healthy profit, but not a killing.

“Realistically, if you were an early investor you could net 10 percent,” he said. “If you came in much later when the program looked to be successful, then the return dropped to 8, 7, 6, 5 percent.” …

Mr. Schlein said he was by no means certain of making money; if unemployment had skyrocketed to 12 percent, for example, he would have expected to lose from huge defaults.

How courageous of these people to take such a daring risk. Still, how many people have been making a 10% profit off of their investments in the last two years?

Mr. Dahlberg, a decorated aviator, became prominent early in the Watergate scandal because his name was on a check deposited in an account controlled by one of the burglars. Mr. Dahlberg, who was not accused of any wrongdoing in the scandal and is now a venture capitalist, did not return phone calls Thursday.

Again with Mr. Dahlberg, who is surely just one of thousands of people The Times could have singled out.

Meanwhile, for the record, according to the FEC, Mr. Dahlberg has donated to both Republican and Democrat candidates – including Max Cleland, Ted Kennedy, John Kerry and Patrick Leahy. But you would never know that from this article.

By the way, the aforementioned Mr. Schlein is a past contributor to Harry Reid and New York City’s perennial radical leftist candidate, Mark Green. But of course his political affiliations go unnoted by the New York Times.

This article was posted by Steve on Friday, December 3rd, 2010. Comments are currently closed.

2 Responses to “NYT Highlights ‘Rich’ Who Got Fed Loans”

  1. Liberals Demise says:

    Digging deep for this guy while shoveling over Frank, Dodd, Murtha…..the list is long and distinguished in those that (D)istingiush them selves as being a jackass.

  2. canary says:

    I recall Ford’s getting a late loan because the Obama’s administration offered it, not because they needed it. No one else seemed to have heard this so I thought I was wrong.

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