Bloomberg Sues The Fed For More Transparency Over $2 Trillion In Emergency Loans

from the that-would-be-useful-info dept

While plenty of people are focused on the $700 billion TARP bailout/rescue plan that Congress gave the Treasury Department, that’s not the only cash the government has at its disposal. In fact, the Federal Reserve has apparently handed out $2 trillion in emergency loans, with almost no transparency over who received the loans and what the collateral is or how it’s valued. Bloomberg (the company, not the mayor) is now suing to have the Fed reveal that info. The government has been talking up a storm about how all of these bailout efforts would be very transparent with respect to taxpayer money — but the reality hasn’t lived up to the rhetoric.

The article linked above is from Bloomberg (the party suing the gov’t), so perhaps it’s biased, but it does seem noteworthy how pretty much everyone tried to dodge questions concerning the $2 trillion in loans. The only person who seemed to be willing to say anything was Rep. Barney Frank, who is the House Financial Services Committee Chairman. Yet, his explanation for the secrecy is hardly compelling:

“I talk to [New York Fed CEO Timothy] Geithner and he was pretty sure that they’re OK. If the risk is that the Fed takes a little bit of a haircut, well that’s regrettable.”

Pretty sure they’re OK? That’s hardly a ringing endorsement for keeping the details of such loans a secret.

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Comments on “Bloomberg Sues The Fed For More Transparency Over $2 Trillion In Emergency Loans”

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16 Comments
Dave (profile) says:

Since when was the Fed subject to FOI act?

This privately run system was entrusted by our congress to have control of the money supply. The decisions the Fed makes cannot be overturned by anything. And since they have the authority of increasing and decreasing the supply of money, the central bank regulates the value of the currency being issued, that is, the value of what you work for. Slavery sucks…

Danny (profile) says:

Brooklyn Bridge comments don't get to the reality of the matter

So, people above joke about a bridge. But this is a real issue with legitimate needs on both sides of this, um, bridge.

On one hand, we do want transparency in government. We do want to know that bailout money is truly needed, deserved, and not going to cronies. We want to know our government is making good decisions – and we need data to know this.

On the other hand, when a company receives emergency government assistance, this signals to the financial markets — and in the case of banks to depositors — that the firm is in trouble. Money bails from the ship and (to continue the metaphor) is under the bridge. We learned from last month’s bailout bill that the big banks couldn’t take advantage of bailout funds on a solitary basis for fear of creating a run on deposits.

The solution to the problem has to address both of these hands.

Hulser says:

Re: Brooklyn Bridge comments don't get to the reality of the matter

On the other hand, when a company receives emergency government assistance, this signals to the financial markets — and in the case of banks to depositors — that the firm is in trouble.

Your point is basically this…

The purpose of the loans is to assist companies who are in trouble because of a lack of public confidence. If the loans are transparent, then the public would know who was accepting the loans, thus triggering more lack of confidence. Catch-22.

That’s a valid point, but I don’t think if fully applies to this situation. The potential damage to the system caused by the almost certain corruption given non-transparency would outweigh any Catch-22-like ill effects.

I personaly think there is a viable range between the point where a company needs extra funds to stay alive and the point where its death is imminent because of lack of funds. Also, the fact that you need the money so badly that you’re willing to brave the transparency is a good litmus test to determine if you’re deserving of the government loan.

DrE says:

Problem is trust (or lack of it)

The real problem is that most of us don’t trust congress. Members of congress (Barney Frank and others) ought to oversee government activities that “require” secrecy (intelligence, military tactics and plans, bailouts, etc). How many of the American voters trust those we elect to do the right thing, to not steal the tax payers blind, and to make decisions in the best interests of country (rather than themselves)? Until we can trust congress, keeping activities transparent to the news media and the public, and not just congress, seems essential.

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