Maiden Lane LLC, Maiden Lane II LLC, Maiden Lane III LLC Balance Sheets from the Federal Reserve Bank of New York as of January 29, 2010.

New York state Thursday sued Bank of America and two former top executives, alleging fraud and deception in the banking giant’s Merrill Lynch takeover in order to get billions in bailout funds. The news came as the top US stock market regulator, the Securities and Exchange Commission (SEC), announced a new agreement to settle its investigation calling for Bank of America to pay 150 million dollars. Andrew Cuomo, the New York state attorney general, announced the lawsuit against the bank, former chief executive Kenneth Lewis and former chief financial officer Joseph Price “for duping shareholders and the federal government in order to complete a merger with Merrill Lynch.”

The Federal Reserve asked a U.S. appeals court to block a ruling that for the first time would force the central bank to reveal secret identities of financial firms that might have collapsed without the largest government bailout in U.S. history. The U.S. Court of Appeals in Manhattan will decide whether the Fed must release records of the unprecedented $2 trillion U.S. loan program launched after the 2008 collapse of Lehman Brothers Holdings Inc. In August, a federal judge ordered that the information be released, responding to a request by Bloomberg LP, the parent of Bloomberg News. “This case is about the identity of the borrower,” said Matthew Collette, a lawyer for the government, in oral arguments today. “This is the equivalent of saying ‘I want all the loan applications that were submitted.’”

The Term Auction Facility (TAF) is a “credit facility” which allows depository institutions to bid upon collateralized loans from their local Federal Reserve Bank. Under the program, depository institutions determined to be in good standing with their local Federal Reserve Bank can participate in auctions of short-term loans with varying terms. The facility was created in December of 2007 following a series of similar actions from the European Central Bank, the Bank of Canada, the Swiss National Bank, and the Bank of England. These actions involved opening “discount windows” through which centralized banking institutions may provide short-term loans to banks to improve liquidity.

Systemically Significant Failing Institutions (“SSFI”) Program. Under the stated terms of the SSFI program, Treasury invests in systemically significant institutions to prevent their failure and the market disruption that would follow. As of September 30, 2009, Treasury, through SSFI, had made and is committed to make further investments in one institution — American International Group, Inc. (“AIG”). This support was provided through two transactions — $40 billion for the purchase of preferred stock from AIG to repay debt owed to the Federal Reserve and approximately $29.8 billion for an equity capital facility that AIG can draw on as needed. As of September 30, 2009, AIG had drawn down $3.2 billion in equity from the capital facility. See the “Systemically Significant Failing Institutions” portion of this section for a more detailed discussion of the AIG transactions.

Fannie Mae, the federally controlled mortgage finance giant, said Thursday it lost $19 billion in the third quarter and had submitted a request to the Treasury Department for $15 billion in more aid to stay afloat. District-based Fannie Mae and its McLean sibling, Freddie Mac, were seized in early September 2008 by the federal government.

CIT Group Inc., the 101-year-old commercial lender that saw its funding dry up in the credit crunch, filed for bankruptcy in an effort to cut $10 billion in debt following a failed debt exchange and U.S. taxpayer bailout. CIT listed $71 billion in assets and $64.9 billion in liabilities in a Chapter 11 petition yesterday in U.S. Bankruptcy Court in Manhattan.

Federal Reserve Chairman Ben S. Bernanke, who led the biggest expansion of the central bank’s power in its 95-year history to battle the worst economic slump since the Great Depression, will be nominated to a second term by President Barack Obama.

Systemic risk is the risk imposed by inter-linkages and interdependencies in a system or market, which could potentially bankrupt or bring down the entire system or market if one player is eliminated, or a cluster of failures occurs at once. Systemic financial risk occurs when contingency plans that are developed individually to address selected risks are collectively incompatible. It is the quintessential “knee bone is connected to the thigh bone…” where every element that once appeared independent is connected with every other element.

By itself, the Troubled Asset Relief Program (“TARP”) is a huge program at $700 billion. As discussed in SIGTARP’s April Quarterly Report, the total financial exposure of TARP and TARP-related programs may reach approximately $3 trillion. Although large in its own right, TARP is only a part of the combined efforts of the Federal Government to address the financial crisis.

American International Group is preparing to pay millions of dollars more in bonuses to several dozen top corporate executives after an earlier round of payments four months ago set off a national furor. The troubled insurance giant has been pressing the federal government to bless the payments in hopes of shielding itself from renewed public outrage.