In a show of how much our government thinks that serving the financial oligarchy, rather than the citizenry, is its prime duty, the Fed is fighting to stop the court-ordered disclosure of who borrowed money under the Fed’s various lending facilities. The reason I lump the Fed in with “the government” is that the central bank has been serving as an off-balance sheet entity of the Treasury for quite some time. And not only are the Fed and Treasury acting in near lockstep, but there has been no meaningful change in the government stance towards the banksters. Yes, Team Obama makes more of a show of trying to rein them in, but push comes to shove, it’s merely Paulson version 2.0: same content, better packaging.
Paulson’s success in muscling through the TARP shows that “when in doubt, claim the economy will fall apart..” That worked so well that now the Fed has the temerity to assert that revealing such delicate information as who is into the Fed most deeply might send the markets into a tailspin. The idea that the recovery is so fragile that a little disclosure would prove damaging is at odds with the official line that the economy is recovering and we no longer need to worry about banks.
The Fed has asked the judge’s order to be stayed until it can file an appeal.
From Bloomberg:
The Fed’s board of governors asked Manhattan Chief U.S. District Judge Loretta Preska to delay enforcement of her Aug. 24 decision that the identifies of borrowers in 11 lending programs must be made public by Aug. 31. The central bank wants Preska to stay her order until the U.S. Court of Appeals in New York can hear the case.
“The immediate release of these documents will destroy the board’s claims of exemption and right of appellate review,” the motion said. “The institutions whose names and information would be disclosed will also suffer irreparable harm.”
The Fed’s “ability to effectively manage the current, and any future, financial crisis” would be impaired, according to the motion. It said “significant harms” could befall the U.S. economy as welll….
The Fed has refused to name the financial firms it lent to or disclose the amounts or the assets put up as collateral under the emergency programs, saying disclosure might set off a run by depositors and unsettle shareholders….
“Our argument is that the public interest in disclosure outweighs the banks’ interest in secrecy,” said Thomas Golden, a lawyer with New York-based Willkie Farr & Gallagher LLP who represents Bloomberg.
Preska’s Aug. 24 ruling rejected the Fed’s argument that the records should remain private because they are trade secrets and would scare customers into pulling their deposits.
“What has the Fed got to hide?” said Senator Bernie Sanders, a Vermont independent who sponsored a bill to require the Fed to submit to an audit by the Government Accountability Office. “The time has come for the Fed to stop stonewalling and hand this information over to the public,” he said in an e-mail.
The lawyers for the Fed sound as if they were grasping at straws. Trade secrets? Bank runs? It is true that banks were afraid to borrow at the discount window last year for fear of being stigmatized. But I would presume that use of these facilities is so widespread that the revelation of information would hardly be stigmatizing now.
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1. Even prior to the particular issue or area, we see here the unchanged propragation of Bush/Cheney secrecy for its own sake.
For that reason alone the kinds of rational arguments made here don't matter to the admin, even prior to its corporatist agenda.
2. Then of course there is that agenda. How sickening it is to see, in case after case, the government, who is supposed to be the ombudsman, advocate, and prosecutor on behalf of the public, instead ranged alongside private criminal interests (or in this case "the Fed", institutionalized corporatism) against the public interest, while the likes of Bloomberg have to fill the vacuum (which seems almost like a chance occurrence – if Bloomberg hadn't filed this suit, would the NYT have? the WSJ?)
3. And not only are the Fed and Treasury acting in near lockstep, but there has been no meaningful change in the government stance towards the banksters. Yes, Team Obama makes more of a show of trying to rein them in, but push comes to shove, it's merely Paulson version 2.0: same content, better packaging.
Exactly like with health care, except there they've completely botched even the packaging.
4. How ingrained, the way even the counsel for the plaintiff uses language like "banks' interest in secrecy". Where the bank has been bailed out by the public, it no longer has any legitimate interest in secrecy, and its alleged "trade secrets" rightly belong to us, so if we want them publicized that's our right.
(The Orwellian concept creep of "legitimacy" is something you see everywhere. Obama himself from at least spring of 08 was calling private insurance rentiers legitimate stakeholders in health care, thus signalling his lies and impending betrayal.)
Let any bank who doesn't like this remain pristine in its "capitalist" "free" "market", and just raise "private" money.
Yves,
Was it a "tongue in cheek" ironic comment ? In the unlikely case it isn't, here is why it is so important :
The names of the borrowers are irrelevant per se, it is the prices at which the repurchase transactions occurred that are essential.
If it appears that the Fed took securities for repo at a much higher price than what was effectively transacted in the market at the same time, it would mean that they breached their own rules, publicly stated on their website. See here
How could they possibly become the super bank regulator if they are not able to follow their own credit policies ?
What happens if some banks had preferential treatment regarding valuations ?
Such an embarrassing disclosure would :
first, be a likely trigger for a congress-led audit,
second, put political pressure on other central Banks (such as the ECB) to do the same. The latter may not be too happy to disclose the valuation of some its assets as it could stir heated debate inside the EU.
Hope we're not missing a bigger picture here again. The lawsuit was filed by Bloomberg, represented by Willkie Farr & Gallagher.
One cannot help thinking that both Bloomberg and Willkie Farr are both so connected to those that run the Fed that this cannot be other than some sort of cooperative effort.
Perhaps Bloomberg filed suit to preempt others from doing so and to be able to manage the escape of information regarding the repos?
Willkie Farr has such an international presence and Bloomberg is one of the most connected guys in the universe…
I still think the timing of this, right in line(a few hours if I remember correctly) with the announcement to re-appoint bernanke is suspicious.
Ludwig could be onto something. I imagine that there is just as much lending to eurobanks as there is to the infamous over here.
What if, in an attempt to avoid more populist rage, the fed buried all their assistance to our good friends across the pond?
Who's gonna tell this guy?
http://www.youtube.com/watch?v=6-eJ-t_XzOE
How can the CEO and CFO attest without disclosure of this material information?
The Fed did not achieve independence from the Feds until 1951. That's over for now, as Yves said.
Bigger picture: maybe it's time for Congress and the White House to overtly assume responsibility for employment levels, and remove that directive from the Fed's mission.
And maybe it's also time for the elected representatives of the people to approve an inflation target and direct the Fed to work to carry it out. That sounds like basic public policy stuff, something that's much too important to be handled by an unelected board of governors.
It is indeed suspicious that it coincided with Ben's reappointment!… what really puzzles me is that, finally, all officials and even academic mainstream economists seem to no longer believe in market mechanisms to drive resource allocation and are entering a new Era of fudging and window dressing rather than facing economic reality in face.
The question is: which is better:
option 1: disclose everything, get clear price discovery and let there be blood
option 2: backstop, insure, takeover and maintain insolvent "too big to fail" corporations for fear of a meltdown and just buy time and hope things just get better somehow
In the end we will never know which option is better, because we are obviously up to our neck in option 2!!
Our media and elites, including even quite a few "liberal" economists like Roubini and Krugman have drunk the koolaid where Bernanke is concerned. There is zero chance his nomination will fail in the Senate. Chris Dodd, a supposed "critic" has already whimped out and said he supports Helicopter Ben. At these hearings, the Republicans almost invariably ask better questions. The Democrats are so caught up with CYA for Obama's bad decisions that they do little more than yammer. Ultimately, it is all kabuki. The Democrats not the Republicans have the votes (and let's face it Bernanke was originally a Republican choice and if their positions were reversed the Republicans might well vote for Bernanke again anyway.)
So we should expect that Bernanke will be asked about transparency and an audit to which he will give expectable blathering non-answers and then he will be reconfirmed.
That's the political side of it. In the real world, Bernanke's reconfirmation marks a continuation of failed policy and keeps the country on track for depression in 2011.
"You want the truth? YOU CAN'T HANDLE THE TRUTH."
http://www.youtube.com/watch?v=5j2F4VcBmeo
Shocking how much of Jack Nicholson's speech could have been ripped from Tim and Ben's views on the situation…
"I have neither the time nor the inclination to explain myself to a man who rises and sleeps under the blanket of the very freedom that I provide and then questions the manner in which I provide it.
I would rather that you just said "thank you" and went on your way."
@J. Lo,
The Jack Nicholson oratory was a reiteration of Rudyard Kipling's poem Tommy, written a little over a century ago:
Yes, makin' mock o' uniforms that guard you while you sleep
http://www.youtube.com/watch?v=nGClrsAN2aY
Geithner and Bernanke may very well believe that, like good soldiers, they are serving the interests of the denizens of the empire. But is that so?
Both Kipling and the officer Nicholson plays, though separated by a little over a hundred years, find themselves in similar social situations:
But because he (Kipling) identifies with the official class, he does possess one thing which "enlightened" people seldom or never possess, and that is a sense of responsibility. The middle-class Left hate him for this quite as much as for his cruelty and vulgarity. All left-wing parties in the highly industrialized countries are at bottom a sham, because they make it their business to fight against something which they do not really wish to destroy. They have internationalist aims, and at the same time they struggle to keep up a standard of life with which those aims are incompatible. We all live by robbing Asiatic coolies, and those of us who are "enlightened" all maintain that those coolies ought to be set free; but our standard of living, and hence our "enlightenment," demands that the robbery shall continue. A humanitarian is always a hypocrite, and Kipling's understanding of this is perhaps the central secret of his power to create telling phrases… He sees clearly that men can only be highly civilized while other men, inevitably less civilized, are there to guard and feed them.
–George Orwell, "Rudyard Kipling," Horizon, February 1942
The question regarding Geithner and Bernanke thus becomes one of agendas. Is their agenda, like that of a good soldier, to continue "robbing Asiatic coolies" on the behalf of U.S citizens? Or is it to turn U.S. citizens into the coolies?
As Milton Friedman said, creating the nation's money – in good times and especially in bad times – ought to be a government function, plain and simple.
It should be obvious why.
The bankers function ought to be, well – banking.
Taking deposits making loans, pooling savings and making investments.
Put the risks on the risk-takers.
Give them the rewards. Don't give the rewards to the banks, while the taxpayers are forced to take the risks.
Come on Yves. It's time to get outside this private Federal Reserve banking, debt-money box.
Do NOT put the nation's money system at risk, and do not put the taxpayers on the hook for the whole damned thing UNLESS they are in charge of the whole damned thing.
Just a thought.
The Chicago Plan for Monetary Reform.
The Money System Common.
"Or is it to turn U.S. citizens into the coolies?"
We're global now and our elite has become a global elite. In the guise of concern for the less fortunate they level the world playing field, but instead of raising up those suffering most, they squash the middle class and wealthy countries down. This might be the problem. Could be that hordes of economists and social scientists and NGO workers, etc, have bought into a plan for world equality, unwittingly (or wittingly) helping a very small group consolidate power.
Love the link at the bottom.
Skippy…poker players should go old west and bring guns to the game, then things would be really interesting stimulating.
It embarrasses me as an American that they hold us hostage like this. I hope the power elite are aware they're holding flame close to the fuse of a powder keg. At the end of the day this is still the United States of America and no one has ever succeeded in going toe to toe with the people of the United States united behind a cause.