Special Investments Management Group

Those may include insurers such as New York-based AIG and Fairfield, Connecticut-based General Electric Co. 'S GE Capital unit. The Fed's effort to avoid losses on mortgage securities originated by Countrywide and then bought by Bear Stearns creates 'a vicious circle,' Cumberland's Eisenbeis said. 'It all comes about because of the Fed's unwillingness to impose losses on creditors' when it bailed out Bear Stearns. Had the New York Fed let the investment firm collapse, 'then we wouldn't have this problem,' he said.

Investor Rights New York Fed spokesman Jack Gutt declined to comment. In August, he said that the institution was involved in 'multiple efforts related to exercising our rights as investors,' which would 'support our primary goal of maximizing the value of these portfolios on behalf of the American taxpayer.' The Fed's actions during the crisis have brought heightened scrutiny from Congress, which approved legislation that will require government audits of the bailouts and force the central bank to reveal recipients of emergency credit. The Fed owns assets from the Bear Stearns and AIG bailouts in three holding companies. The New York Fed, which has policies to manage conflicts of interest between its multiple units, created its Special Investments Management Group in January to oversee the assets. Maiden Lane Maiden Lane LLC, named for the street bordering the New York Fed's Manhattan headquarters, bought about $ 30 billion of Bear Stearns assets that JPMorgan didn't want when it acquired the company. Maiden Lane II and III were created to hold the assets from AIG's rescue.