The real “Mall of America” is in Oklahoma, not Minnesota.
When the Federal Reserve took on some $29 billion in assets from Bear Stearns, it got such headaches as owning the Crossroads Mall in Oklahoma City (pictured here), whose operators defaulted on a $76 million commercial mortgage, forcing the Fed to take the title after paying $11.2 million for the half-empty retail space and try and resell it.
Now, trying to deal with the dead mall and other toxic assets it inherited is creating a mess of litigation.
As Reuters columnist Matthew Goldstein reports, that makes the Fed a reluctant landlord. New cases are forcing the Fed to either sue to collect on multi-billion commercial real estate debt, or fend off claims from rival creditors.
Reuters: But this mushrooming litigation is drawing the Fed into conflicts with commercial developers or into uneasy partnerships with some of the banks it regulates.
It even means that Fed Chairman Ben Bernanke has become a reluctant landlord — forced to rely on BlackRock, which manages Maiden Lane [the Fed’s entity to hold the Bear assets] for the central bank, to collect the rent from some of its commercial tenants.
But it’s the inevitable outcome of taking on a distressed portfolio that includes $8.5 billion in commercial mortgages — hotel chains and office complexes, assets that the Fed had marked down in value by about half last summer.
Needless to say, dealing with B-grade malls in Oklahoma or the Extended Stay Hotel in South Carolina isn’t exactly what the Fed should be spending time on.