The Fed “Owns Credit-Default Swaps ... On Debt Owed by California and Nevada. So the Fed Would Profit If One of Those States Defaulted on its Debt.”

In the you-can't-make-this-stuff-up department, NPR points out:

As part of the bailouts of AIG and Bear Stearns, the Federal Reserve Bank of New York spent more than $70 billion to buy toxic assets the companies owned. Last week, prompted by a lawsuit filed by Bloomberg News, the Fed finally told the world exactly what it bought.

The Fed now owns loans to Hilton hotels in Hawaii, Puerto Rico, Malaysia and Trinidad. It owns loans to the Miami airport, and the Civil Opera House in Chicago.

It also owned a loan to Crossroads Mall in Oklahoma City. Then, when the owners of the mall couldn't make the payments, the Fed foreclosed. So now it owns the mall, which includes a Chick-fil-A and an AMC theater.

The mall's for sale — cheap! "This lender owned distressed asset ... can be purchased at far below replacement cost," this listing says.

The Fed also owns credit-default swaps — basically, insurance policies that pay off if a borrower defaults on a loan. It holds swaps on the debt of Florida schools, and on debt owed by California and Nevada. So the Fed would profit if one of those states defaulted on its debt.

Granted, the Fed holds a very small percentage of outstanding CDS.

But it is a fitting symbol of the fact that the states - and American people's interests - are not necessarily aligned with the Fed's interests.

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