Monday, January 11, 2010

Fed wants to keep US bailout secrets

Bloomberg has been doing a great job of showcasing the "transparency" of the Federal Reserve over the past year or so, in spite of many attempts by the Fed and bailed out banks to block the news outlet's progress in procuring data on a $2 trillion loan program initiated by the Fed during the 2008 financial panic.

Here's Bloomberg's latest on the Fed's bailout secrets:

"The Federal Reserve will ask 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, after hearing arguments in the case today, 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.

Bloomberg argues that the public has the right to know basic information about the “unprecedented and highly controversial use” of public money. Banks and the Fed warn that bailed-out lenders may be hurt if the documents are made public, causing a run or a sell-off by investors. Disclosure may hamstring the Fed’s ability to deal with another crisis, they also argued. The lower court agreed with Bloomberg..."

As noted in the earlier Bloomberg piece from Dec. 2008 (also linked above), the Fed lent cash & government securities to banks in exchange for collateral including "stocks and subprime and structured securities such as collateralized debt obligations".

Obviously, many people are a bit concerned about the quality of that collateral. Having access to data on the quality of securities held on the Fed's balance sheet would give investors & the public an idea about the potential losses the government faces on those assets.

Related articles and posts:

1. Fed refuses to disclose recipients of $2 trillion - Bloomberg.

2. Ron Paul: audit the Fed - Finance Trends.