Huffington Post:
Rep. Alan Grayson (D-Fla.) mocked the Federal Reserve in what is best described as a standup comedy routine on the floor of the House of Representatives Thursday.
"I want to congratulate everyone in America, because you now own a hotel chain," Grayson began. "I know what you're thinking -- you're thinking: 'That's funny, I don't remember buying the Red Roof Inn.' But the Federal Reserve Bank, in its wisdom, has done it for you. The Federal Reserve Bank has seen to it that you have the pleasure of ownership of this delightful chain of hotels that extends from sea to shining sea."
"One of the properties," Grayson continued, "happens to be the Red Roof Inn convention center property, right in Orlando, right in my district -- I am so proud. I think I'll stop by there and ask for a free room."
Grayson maintains this verve while explaining a leveraged buyout gone bust that apparently left the Fed holding the Red Roof Inn as part of a pile of crappy assets. "The Federal Reserve became the sucker of last resort. And in doing so, the Federal Reserve made you -- you, America! -- the sucker of last resort."
What most folks didn't know that Bear Stearns was Red Roof Inn's assets.
From Naked Capitalism website:
A recent Wall Street Journal story tells us a lot of hotels are in trouble right now. In particular, Red Roof Inns has had delinquencies since last June, plenty of time for it to be picked up in the 1/29/10 transaction level reports just released. But what do we see? Click to enlarge; see p. 21):
Now why is this significant? The values here foot with that of a prospectus on the “RRI Hotel Portfolio” prepared by Bear Stearns. From page d-14:
The Loan. The third largest loan (the “RRI Hotel Portfolio Loan”) is a $186,000,000 pari passu portion of a $465,000,000 first mortgage secured by the borrowers’ fee interests and leasehold interests in 79 Red Roof Inn hotels (the “RRI Hotel Portfolio Properties”)….
The Borrowers. The borrowers, R-Roof I LLC, R-Roof II LLC and R-Roof III LLC, each a Delaware limited liability company, are single purpose entities, each with an independent director, that own no material assets other than its respective properties in the RRI
More from Naked Capitalism website:
Welcome to the wonder through the looking glass land of Maiden Lane, the bailout vehicle that holds crappy Bear Stearns assets. According to the Fed, the taxpayer will not lose a dime on it:
A number of facts mitigate the risk of losses being incurred on the FRBNY[Federal Reserve Bank of New York] loan. First, there is a substantial pool of professionally-managed collateral at Maiden Lane that, as of March 14, 2008, was valued at $30 billion. In addition, JPMC’ [JP Morgan Chase]'s subordinated loan to Maiden Lane will absorb the first $1.1 billion of any loss that ultimately occurs. Moreover, and perhaps most importantly, the collateral will be sold over time in an orderly manner that is not affected by the unnaturally strong downward market pressures that have been associated with the recent liquidity crisis.
Finally, the FRBNY is entitled to any residual cash flow generated by the collateral after the FRBNY and JPMC loans are repaid. Given these protections, the Board at this time does not believe that the extension of credit to facilitate the acquisition of Bear Stearns will result in any net cost to the taxpayers resulting from
the failure to repay the principal and interest of the FRBNY loan
So, we know, thank to Grayson, that Red Roof Inn was one of Bear Stearns' asset. Remember Bear Stearns filed bankruptcy and was acquired by JP Morgan Chase. And it is interesting that JP Morgan Chase's CEO Jamie Dimon didn't want Red Roof Inn as an asset which left the Fed to acquire Red Roof Inn. After all, Mr. Dimon's role as New York Federal Reserve Director goes a long way. His role at the New York Fed "includes approving the Bank's budget, overseeing operations, and appointing the Bank's officers."
Click here to read more of Mr. Dimon's role at the New York Fed. Now, wouldn't this be a conflict of interest? Hmmm? Here is the video of Grayson on the House floor:
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