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To: Rande Is who wrote (57559)	10/2/2009 11:02:56 AM
From: joseffy	of 57584

I always thought the handling of the Lehmen situation STUNK. Here is more: Fed Draws Court's Eyes in Lehman Bankruptcy The Wall Street Journal ^ \| 10/2/09 \| Jeffrey McCracken and Mike Spector online.wsj.com A court-appointed examiner investigating Lehman Brothers Holdings Inc.'s bankruptcy has been exploring whether the Federal Reserve improperly cut in front of other creditors owed money in the $613 billion bankruptcy case, records show. Billing records filed with the court show the examiner is investigating an issue that has angered many of Lehman’s creditors: how the Federal Reserve and the New York Fed — which lent Lehman $46 billion in cash and securities before its bankruptcy filing last September — were paid promptly and in full, while tens of billions of dollars in other debts were left to be sorted out in court. It remains unclear when and how much Lehman creditors will be repaid. ... Such a finding would have little legal precedent and could turn politically fraught, bankruptcy lawyers say. Yet it could bring a focus to one of the unresolved questions of the financial crisis: just how much special treatment the federal government receives above private-market players when it becomes a direct participant in the markets… Many legal experts said bringing claims against the Fed would be an uphill battle, because the Fed would qualify under a long-held standard of sovereign immunity. That concept generally holds that the government can’t be held legally accountable for its actions. But Lehman’s estate could have an opening, because by the standards of bankruptcy law, the government isn’t supposed to receive immunity, said Richard Levin, a partner at law firm Cravath, Swaine & Moore LLP who helped write the U.S. bankruptcy code. “The Lehman estate could sue the Fed,” Mr. Levin said, adding that the Fed would likely argue it can’t be held liable. ... ____________________________________________________________ So is the Fed a private institution or is it the US government? A lawsuit like this would bring up that question for all to see.

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