Fed Deal Done in Secret By Secret Central Banker!

The Federal Reserve's unprecedented bailout of Bear Stearns was crafted not at the White House or the Treasury but in secret by a New York central banker whose name is unknown to Washington power brokers and who was a Clinton administration presidential appointee.

"It's a new day," commented one investor and longtime Fed watcher. Around the world, that day's dawning is viewed with apprehension because of election-year rhetoric from America.

The plan pressed by Timothy F. Geithner, president of the New York Federal Reserve Bank, effectively substitutes the central bank for the market in determining financial outcomes. Nobody takes seriously the assertions by Fed spokesmen that the aid for Bear Stearns and its dictated bargain-price sale to J.P. Morgan was "extraordinary." In Washington and New York, the question is who will be next. Speculation turned to who else will qualify as "too big to fail."

One candidate was Lehman Brothers, whose stock dropped 19.1 percent the day after the bailout was announced. Government-backed lending agencies Fannie Mae and Freddie Mac have also been seen as bailout candidates.

The central bank's bold new role relieves the pressure on American financiers who have committed serious errors, but it does not reassure investors around the world who are alarmed by what they perceive in the U.S. political process, where class warfare has gained traction.

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