Federal Reserve investigated for 'queue-jumping' on Lehman Bros money

2 October 2009

The Federal Reserve is being investigated over claims that it improperly cut in front of other creditors to get the money it had lent Lehman Brothers back.

Lehman had been lent $46 billion by the Federal Reserve and the New York Federal Reserve, money that was paid back promptly and in full after the bank went bankrupt in September 2008, reports the Wall Street Journal.

But thousands of other creditors remain unpaid after Lehman Brothers went bust with $613 billion of debt.

If court-appointed examiner Anton Valukas finds the Federal Reserve received preferential treatment, Lehman's creditors may pursue claims against the organisation.

Mr Valukas, a former US attorney who is now chairman of law firm Jenner & Block LLP, refused to give further details of the investigation.

Lehman Brothers has had more than 16,000 claims filed against it, with creditors including Paulson & Co and UBS AG.

By Tony Aynsley

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