Both Federal Reserve Chairman Ben Bernanke and then New York Fed President Tim Geithner assured senators in April 2008 banking committee testimony that the assets assumed by the Fed in its bail-out of Bear Stearns were "investment grade." In loading its own balance sheet with unprecedented credit risk, the Fed not only made the American people guarantors of toxic paper – and placed the value of the US dollar at greater risk – it materially misrepresented the quality of the securities involved. While credit quality and credit risk were at the heart of the unfolding banking crisis, the Fed itself was claiming that $30 billion in collateral it assumed consisted of only currently performing and investment grades assets. But the collateralized debt obligations and mortgage-backed bonds involved had already been downgraded at the time of the testimony.

In the face of Fed stonewalling, Bloomberg News had to go to federal court to get documents in the transaction released to the light of day. Finally this summer Bloomberg was able to report that the government "became the owner of $16 billion of credit-default swaps, and taxpayers wound up guaranteeing high-yield, high-risk junk bonds."