The Fed's Emails: Part 2

Continuing on the Fed email thread from yesterday, the House Oversight Committee formally released a packet of emails which replicates the batch I released yesterday (although has only 8 pages to my 13). One notable addition is the itemization of the ML "legacy portfolio" as presented below: obviously the biggest risk categories were Investment Portfolio, ABL and PE, with $21, $13 and $11 billion of exposure. One assumes the HVOL4 massacre and the Basis trade implosion are lurking somewhere within the first one.



Interestingly, the committee released a second previously unleaked document which transcribes verbatim a presentation by Ken Lewis and Joe Price on the ML situation from December 17.

Probably more interesting, is a previously restricted document prepared by the Fed Board of Governors titled "Considerations regarding invoking the systemic risk clause exception for Bank of America corporation." A very insightful and behind the scenes view of the economy from the Fed's point of view. Notable on page 10 is the redlined comments by one JCM1 who notes: "The references to the four critical markets in the Sound Practices paper may convey the illusion that letting BAC/ML "fail" could be "doable." In light of Lehman, the global impact would be a complete disaster globally." Good of the Fed to know how they really felt about the downstream events that would result from a MAC trigger... And here we are talking semantics if Bernanke had any qualms about annihilating Lewis if he let the house of cards fall.

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