In case you somehow managed to miss it, our friendly pawnbroker of last resort central bank has been taking lots of crap collateral in return for loans under its alphabet soup of facilities. As we are learaning in our housing meltdown, collateral may not prove to be worth as much as it was said to be at the time the loan was made. Inquiring minds are curious as to what, exactly the Fed has taken, particularly as the numbers are becoming stratospheric.
Bloomberg has asked nicely for some of this information, and is now being forced to sue under to the Freedom of Information Act, and the Fed intends to fight! This ought to be a scandal, but after the TARP, the electorate is seems resigned to taxpayer money being thrown at floundering financial enterprises with little in the way of checks or prudence. If the Fed indeed was taking conservatively valued collateral as it has always claimed it was, there would be no reason for it to attempt to squash this request. The Fed’s argument, as I infer, is the loans were made by the Federal Reserve Bank of New York, which isn’t a federal agency and thus not subject to the FOIA.
From Bloomberg. Note I was sent the text by reader Marshall; the story is in typical Bloomberg style, including its odd quotation marks, but I cannot find it one the free version of the site, which means it is either only on the professional version as of now (odd) or they yanked the story (troubling, particularly since the case is a mater of public record):
Update 5:25 PM A reader did find it on the Bloomberg site, and the link has been added above, but note that as of when the article was posted, it did not come up under a Bloomberg site search (using first “Winkler” and then “Thro”). It may have been posted on the professional site first with a delay before it went up on the hoi polloi version.
Bloomberg News asked a U.S. court today to force the Federal Reserve to disclose securities the central bank is accepting on behalf of American taxpayers as collateral for $1.5 trillion of loans to banks.
The lawsuit is based on the U.S. Freedom of Information Act, which requires federal agencies to make government documents available to the press and the public, according to the complaint. The suit, filed in New York, doesn’t seek money damages.
“The American taxpayer is entitled to know the risks, costs and methodology associated with the unprecedented government bailout of the U.S. financial industry,” said Matthew Winkler, the editor-in-chief of Bloomberg News, a unit of New York-based Bloomberg LP, in an e-mail.
The Fed has lent $1.5 trillion to banks,…. Collateral is an asset pledged to a lender in the event that a loan payment isn’t made.
The Fed made the loans under 11 programs in response to the biggest financial crisis since the Great Depression…
Bloomberg News on May 21 asked the Fed to provide data on the collateral posted between April 4 and May 20. The central bank said on June 19 that it needed until July 3 to search out the documents and determine whether it would make them public.
Bloomberg never received a formal response that would enable it to file an appeal. On Oct. 25, Bloomberg filed another request and has yet to receive a reply.
The Fed staff planned to recommend that Bloomberg’s request be denied under an exemption protecting “confidential commercial information,” according to Alison Thro, the Fed’s FOIA Service Center senior counsel. The Fed in Washington has about 30 pages pertaining to the request, Thro said today before the filing of the suit. The bulk of the documents Bloomberg sought are at the Federal Reserve Bank of New York, which she said isn’t subject to the freedom of information law.
“This type of information is considered highly sensitive, and it would remain so for some time in the future,” Thro said.
The Fed didn’t give Bloomberg a formal response because “it got caught in the vortex of the things going on here,” said Michael O’Rourke, another member of the Fed’s FOIA staff…
The case is Bloomberg LP v. Federal Reserve, U.S. District Court, Southern District of New York (Manhattan).
Update 11/8, 3:30 AM David Merkel supports the idea of disclosure of the Fed collateral, and points out that insurers have very detailed disclosure, and no harm come to them.
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$1.5 trillion is a lot of saxaphones, power tools, guitars, gold watches and jewelry.
Uh, Yves, you may want to proofread a bit more. I’m seeing major typos and missed words in your posts the last couple of days.
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aKr.oY2YKc2g
I have not read the text of the law, nor am I a lawyer. But common sense would say that banks should not divulge collateral from customers, where such information could be used be competing banks for advantage. Much of the LTCM correlation seems to have come from its book being leaked.
The Tarp law should have included decent oversight language, which would have included – in aggregate – what was on the governments books.
But I know that Tarp was crap, and here we are.
With a populist government coming into power, we may get more anti-biz bullying that will result in more transparency, and I suppose the pressure from this blog is a starting point.
I see.
The reporters at Bloomberg are supposed to have access to all of the internal figures of every entity that comes to the Fed for a loan?
Sounds like Rule 11 to me. In a New York hurry.
Matt Dubuque
The story is still on Bloomberg’s website. Click on Law and it’s there.
I didn’t read it as Bloomberg asking for what specific items were used as collateral by what specific institutions, rather they’re looking for aggregates by type of security. But there isn’t much to go on here.
If those same entities want the US taxpayer to be on the hook then YES, Matt Dubuque, they ought to have to say. I know you will say “but then the TARP would be useless” and I will say “if they have to lie and hide for it to be useful then perhaps it shouldn’t be done.” You’re welcome for the proxy argument =)
You dont need to know this info. If it wasnt a good idea, the Fed wouldnt do it. This is for your protection and well-being.
For further clarification, go watch the TV series..The prisoner.
What does it really matter? Everyone knows the Fed is not a real bank and is never audited. They can create money — as much as they want — out of nothing more than the legal authority to do so. It says right on their notes that they’re ‘legal tender for all debts public and private’ — no one is going to question that, i.e. their standing and value, based on the rather arcane concept of what’s on the Fed’s balance sheet. How many people even know the Fed has a balance sheet?
As for the supposed risk to the soundness of the dollar, see the previous paragraph. Bottom line: no matter how much debt the Treasury wants to sell, it always finds more than enough willing buyers.
It’s true that all of this is a joke. Most people have heard of the concept of the ‘Big Lie’. Well this is like the ‘Big Joke’. Except very few people seem to get it.
But good luck to Bloomberg.
Filings by private entities to government regulatory agencies are typically exempt from FOIA, and special filings–as under the various recent emergency measures–have been made with the understanding that they are exempt from FOIA. But aggregated information, when not otherwise included in official government communications (which typically are subject to FOIA), is a gray area.
To be honest, my own regulatory agency has such information but has not disclosed any of it, and frankly I’m not sure what we would do if we were hit with a FOIA request (probably have our counsel tie it up in the courts while asking Congress to provide us cover, I suspect.) The general approach we take is to not advertise the presence of information that we’re not certain we want available to the public; but in this case, of course, the press knows what information is held by the Federal Reserve.
say it so bloomie!
who would have thunk it?
things are getting curiouser & curiouser and strange bedfellows keep joining the party.
"With a populist government coming into power, we may get more anti-biz bullying that will result in more transparency, and I suppose the pressure from this blog is a starting point."
yes indeed, but perhaps gentle but persistent prodding is more effective? no one likes a bully on either side.
let's keep it up with no letdown though. the cracks are opening.
Matt,
I suggest you learn to read. Bloomberg is NOT asking for “all of the internal figures of every entity that comes to the Fed for a loan?” And BTW, having worked for a bank, there is no way the Fed or any regulator has that.
BBerg is asking for details of collateral posted for a specific time period.
I have not read the suit, but it ALSO appears that BBerg is NOT asking for WHO posted what collateral, merely WHAT the collateral is. This eliminates the concern some have raised, that it could discourage particular banks from using the Fed, and gets at the issue most of us are concerned about: how drecky is the stuff posted at the Fed and are the Fed’s marks realistic? Recall that the Fed is accepting dealer marks on most (maybe all) of the collateral submitted at the time it is presented.
Anon of 2:50 PM,
Thanks for letting me know. The typo police used to jump on me faster. I have been stressed out the last few days, and my attentiveness to proofreading is typically one of the first casualties.
The federal reserve is not subject to the foia. It is a private bank.
Sorry your stressed out Yves, try to goof off some this weekend.
I doubt this will make it through the courts before things unwind enough to make it more of a historical footnote as opposed actionable data.
Collateral of possible dubious quality?
Here at Rick’s, the patrons at the bar have only one thing to say, “we’re shocked”!
Today Prosperity Bank took over the assets of the failed Freedom Bank of Houston Texas. The FDIC announced it and disclosed the terms of the deal. We now know something about the assets now owned by Prosperity Bank.
If Prosperity Bank, which participated by helping solve the FDIC’s problem, is subject to this disclosure, surely those who take advantage of the Fed’s largesse in accepting garbage collateral should disclose it too.
This is just a gift to the wicked, by the Fed. I hope the givers of such gifts (those that are in the Treasury Department) are cleaned out promptly by the Obama Administration. A Day 1 “massacre” of those guys (don’t return to your desk, we’ll send your items to you at Goldman, or another address if you really insist) would not be a bad idea.
How dare you question my promise to maybe repay if I feel like it and it is not raining that day?
My Mormon ancestors lived in a house on the converging points of 3 states. When the law from one state came to bust them for polygamy, they all went into a room in a different state. That only worked until the states got coordinated….
When “the Fed” wants a handout, it goes straight to congress and says, “Ladies and gentlemen,this is a stickup. Thank you.”
There are plenty of people who believe that “the Fed” is a federal government agency – most shockingly, Obama, in his official statement on that topic of a few months ago. He reasoned that the Fed should have MORE power than it does now.
Seeing its insistance on being opaque – because it is NOT a government body for the purpose of answering questions! – I found myself asking, well, should we NATIONALIZE the fed?
But then, what does that mean anymore, if the rest of the government, including the Treasury, has been effectively taken over by people strongly aligned with the interests of particular financial/business enterprises?
What does it get us to nationalize anything when the governemnt itself has been privatized?
Remember(?) before the Treasury Czar was granted further magical powers,(core)demands were such: Immunity from prosecution; Treasury TARP actions to be kept on the Federal Reserve books, etc.
Well, Congress has oversight involving anything connected to the Federal Reserve. Using this Congressional oversight, Federal Reserve books are exempted from a full accounting (how convenient). See why the Treasury wanted the Federal Reserve to keep their TARP books? A nuclear explosion could be hidden in those books.
Bloomless is looking for values. The collateral is worth zero, all of it. Better question, “Is it worth less than zero?” We’ll be the last to know but watch as the US$ begins reflecting it.
@ ZOG
Are you fricking kidding me with that shit?
I have a suggestion – go to another blog if you want to disseminate your anti semitic hate. I suggest some place that ignorant people congergate. Say Elders of Zion blog.
I am hear to read and learn not be subjected to sheer stupidity.
If the Fed isn’t subject to FOIA, then why does it have a FOIA Service Center? I infer the Board of Governors may be but the branches are argued not to be.
From Jesse’s Café Américain; “AIG has moved its 3Q 08 financial results from after the close of trading on Monday to 6 AM, before the Bell. Another late Sunday night before the start of Asia trading?”
Anyone comments from those in the know? Perhaps this a great example of why the Fed is resisting FOIA. They’ll have to reveal just how much they really ut into a shonky outfit like this.
I have to weigh in here; I make $5000.00 an hour and these Fed punks are dog meat that are ready to be ground into greasy burgers.
Item #1, The concept of denying information based on commercial confidentiality is bullshit, because if they can say that, then we get to go back to the origins of TARP and the authority of The Treasury to commence in commercial activities — which it had no authority or power to engage in; all this alphabet activity has been a process to usurp authority away from a very weak-minded Congress, who is complacent in collusion, as they aid and abet in this fraud! The Treasury, by granting itself the power to engage in commercial enterprise and inventing phantom powers was absurd from the start, thus to suggest they can hide behind commercial exemption is simply retarded.
I call to your friggn attention: … misunderstanding or lack of knowledge is insufficient however, and the burden of proving such fraud or concealment, by evidence which is clear, precise and convincing, is upon the asserting party." Id. Moreover, "in order for fraudulent concealment to toll the statute of limitations, the defendant must have committed some affirmative independent act of concealment upon which the plaintiffs justifiably relied..
> I suggest that now that Paulson and Bernanke are in the business of commerce, that they review the following:
The CEO and CFO must design corporate-wide disclosure controls and procedures to ensure that material information is made known to them. Lack of knowledge is not a defense if the officers failed to implement an effective compliance system. The SOX increases the penalties for false certification of financial reports with fines of up to $5 million and prison terms of up to 20 years. Additionally, if a company restates its financial statements as a result of material misconduct, CEOs and CFOs may face forfeiture of certain bonuses and profits.
>> The question here is, is The Treasury involved in Commercial operations, or are they involved in managing tax payer revenues? If The Treasury is using public funds for TARP, then I sure as hell think these funds and all information should be public!
See: THE FREEDOM OF INFORMATION ACT
5 U.S.C. 552(b)(4)
http://www.usdoj.gov/oip/foiastat.htm
> Also see: Freedom of Information Act Guide, May 2004 Exemption 4
http://www.usdoj.gov/oip/exemption4.htm
Exemption 4 of the FOIA protects "trade secrets and commercial or financial information obtained from a person [that is] privileged or confidential." (1)
Now, I'm really pissed off again…. thanks Yves!
I have no hair left on my head tonight and my keyboard is now covered, with hair and tears… why?? I know this is the wrong court and a bad example, but, I'm looking for some clues … ok?
>> The district court described a three-part test for determining whether an obligee's failure to inform a surety of material facts amounts to fraudulent concealment. To meet this test, the district court stated, a defendant must show "i) facts known to the obligee that materially increase the risk to the surety, beyond that which the obligee has reason to believe the surety intends to assume; ii) knowledge by the obligee that such facts are unknown to the surety; and iii) opportunity on the part of the obligee to communicate the relevant information to the surety."
When a surety does request information from an obligee, silence on the part of the obligee can amount to fraudulent concealment.
If, as in this case, it is the principal rather than the obligee who misleads the surety, the obligee may still be obligated to disclose facts if it colluded in the deception. In Damon , for example, the obligee itself had convinced the principal to transfer the notes to third parties.
Finally, a duty to disclose may arise if the obligee has unique access to material information. In First Citizens , the court noted that only the obligee bank was in a position to know that the bank had released the principal's collateral, and that as a result the bank had a duty to disclose that fact.
Nahhh, that aint it, sorry, what about a better FOIA case?
What about: The USA PATRIOT Act amended the Bank Secrecy Act, with which banks must comply. Several provisions and implementing rules were added to bankers’ compliance obligations.
Nah… Ok this is it baby!
In 1976 Congress enacted the Government in the Sunshine Act.1 The purpose of the Sunshine Act is to provide the public with information regarding the decision-making processes of the Federal Government “while protecting the rights of individuals and the ability of the Government to carry out its responsibilities.” Pub.L.No.94-409, § 2, 90 Stat. 1241 (1976). To effectuate this purpose, the Act requires that every “meeting” of a covered “agency” be open to the public, 5 U.S.C. § 552b(b), with but a few limited exceptions. See 5 U.S.C. § 552b(c)(1)-(10). The Act also mandates the public announcement of meetings, 5 U.S.C. § 552b(e), and the maintenance of a complete transcript or electronic recording of meetings closed under any of the section 552b(c) exemptions. 5 U.S.C. § 552b(f).
3
The definitions of “meeting” and “agency” in the Sunshine Act are quite specific. The term “meeting” applies only to “the deliberations of at least the number of individual agency members required to take action on behalf of the agency where such deliberations determine or result in the joint conduct or disposition of official agency business ….” 5 U.S.C. § 552b(a)(2). In order to be covered by the Sunshine Act, an “agency” must initially fall within the ambit of the definition found in the Freedom of Information Act (FOIA), 5 U.S.C. § 552(e) (1976),2 and in addition must be “headed by a collegial body composed of two or more individual members, a majority of whom are appointed to such position by the President with the advice and consent of the Senate ….” 5 U.S.C. § 552b(a)(1) (emphasis added). It is this definition of “agency,” and in particular the words “to such position,” upon which this case turns.
4
B. The Chrysler Corporation Loan Guarantee Board
We do not quarrel with the district court’s characterization of the Sunshine Act as a broadly remedial statute dedicated to the principles of open government deliberations and the public’s “right to know.” 488 F.Supp. at 876. The fact that legislation has a remedial purpose, however, does not give the judiciary license, in interpreting a provision, to disregard entirely the plain meaning of the words used by Congress. This court has stated in the FOIA context that, even where a statute is broad in scope, proper deference must be paid to the plain meaning rule. Consumers Union of the United States, Inc., v. Heimann, 589 F.2d 531, 533 (D.C.Cir.1978).
Although the Act uses as a foundation the general “agency” definition found in the FOIA, Congress chose further to restrict Sunshine coverage to particular types of agencies. The Act clearly does not apply to agencies headed by a single individual, and Congress failed to act on an early version of the legislation that would have made all agencies having more than one member subject to the Act, without regard to method of appointment.8
Symons
v.
Chrysler Corp. Loan Guarantee Board
http://www.altlaw.org/v1/cases/419051
Huh… huh, closer???
Yves, forgive me, but this does sem on topic and related to TARP and this Bloomberg FOIA, so one last blast, because I think The Chrysler Corporation Loan Guarantee Act of 1979 and the right of taxpayers to be involved is highly related!!!!! I’m sorry to sort of do my DD on-the-fly, but this was a good find!
FYI: The facts in this case are straightforward and undisputed. Appellee Howard Symons is a staff attorney and lobbyist with Congress Watch, a public interest organization. On April 23, 1980, counsel for Symons sent a letter to the Board demanding that it comply with the Sunshine Act and stating that relief would be sought in federal court if he was not assured that such compliance would ensue. Joint Appendix (J.A.) at 10-11. The Board responded on the following day that it is not an “agency” required to conduct its business within the contours of the Act since none of its members were appointed to their Board positions by the President. J.A. at 12. Symons subsequently filed suit in the United States District Court for the District of Columbia on April 25, 1980, and moved for a temporary restraining order directing the Board to comply with the statutory requirements of the Act pending a decision on the merits.3 On the same day, the district court issued a temporary order enjoining the Board from holding any meeting in a manner inconsistent with the Sunshine Act provisions. J.A. at 13.
8
On May 14, 1980, after briefing and argument, the district court issued a final order and accompanying opinion holding that the Board is an “agency” for Sunshine Act purposes and directing the Board to comply with the Act in all respects. J.A. at 27-33. It is this decision, now reported at 488 F.Supp. 874 (D.D.C.1980), that the Government appeals.
@ anonymous 12:28 AM
I have a suggestion – go to another blog if you want to disseminate your anti semitic hate.
I read the entire post by z.o.g. and didn’t see any “hate” or ‘anti-Semitism’. If I mention that Jews are also disproportionately Nobel Prize winners, especially in difficult fields like the hard sciences (physics, chemistry), am I also spreading ‘anti-Semitic hate’? If I mention that in nearly every major 100m sprint final for men, all the participants are black men of west African descent, does that mean I’m spreading ‘racist hate’? Probably not. How about if I state the facts that in the US black males are less than 10% of the population, but represent over 50% of all murder convictions (link left as an exercise) — does that make me a ‘racist hater’?
Thanks for your efforts toward censorship though — always nice to see that.
@z.o.g.
Thanks for the data. I’d also noticed that among the financial elite — at least here in the US — Jews seem to be dominant, and this includes the Fed; but I’d never seen the numbers. And you’re right, the degree to which they are disproportionately represented at the highest levels of the Fed is HUGE, although I’m not sure what to ascribe it to. However for supposedly being so smart — e.g. Ashkenazi Jews have the highest average IQ of any identifiable and tested group — between Greenspan and Bernanke those two sure have made a mess of things.
And last but not least: it’s weird that the last 4 letters of Ashkenazi are…
Thanks for info ZOG. This is very interesting and thought provoking.
I am quite sure there is a direct correlation between the money, blood, Media, political resources spent to support Israel.
3 to 5 million dead in Congo last few years … not getting any support from us at all. Sudan, Somalia, black South Africans … East Timorese …
Yves: The Columbia Journalism Review has issued an open invitation to organizations, companies, individuals et al who wish to join in a coordinated effort aimed at greater transparency and disclosure. For more see:
http://www.cjr.org/the_audit/goldmans_backdoor_bailout.php
This call to action gives an opportunity to everyone, who like yourself and so many others, have emphasized the need for more regulation in financial markets.
Yes, regulation itself must await action by elected officials and regulatory agencies.
But, as the Bloomberg action as well as CJR call to action illustrate, folks can act RIGHT NOW to pressure, sue, cajole and take other steps aimed at transparency and disclosure.
Kudos to BN’s editor Matthew Winkler for taking this matter into his own hands on behalf all of us.
Many, many thanks Matt! It will be a tough haul, however, that “confidential commercial information” exemption is used frequently by gov’t bodies. For example, the Indiana Community and Housing Development Authority did not disclose (at our request under the FOIA) how they set about awarding $8million in tax credits to an Indianapolis developer to build a low-income housing project in NW IND. Said developers used to work at the ICHDA. The ICHDA complied to our request only by half, refusing us the critical half under the confidential commercial info exemption.
@Anon of 2:50 PM, your lack of appreciation for Yves relentless efforts on our behalf is astounding. You should be begging forgiveness for this slight.
Thanks, Doc.
You’re obviously under-priced.
I guess I am just not sure exactly which “meetings’ of a quorum of the FRBoG had a discussion of the nature of the collateral to be used to match up to our public money.
More important to me is the fact that the FRB system is a private corporation. Period.
I know we all know it.
Yet, many deny it.
And the fact that this private corporation is capable of extending limitless debt payable in taxpayer derived, US- denominated dollars.
Thus, as Paulson unexpectedly blurted out to the Congress:
“The US taxpayer is ALREADY on the hook!”
Not one Congressman nor one reporter asked what the f*#* he was talking about.
Treasury-issue, debt-free money.
Do not pass Wall Street.
Go directly to peaceful prosperity.
One hundred percent reserves.
Let the bankers lend real money.
joe, what’s interesting to me about this suit is not necessarily its chances for success, but the potential for the FED to admit in a court of law that it is a private corporation and not subject to FOIA.
if Mr.O is confused about that (tho i don’t think he is anymore), then many many many other people are as well.
let the spade call itself a spade in order to try to get away with the fact it doesn’t call itself a spade…dig?
(however, doc’s digging with regards to chrysler is an interesting development)
one footnote: if you watch Mr.O’s press conference, he mentioned reading lincoln’s writings…let’s hope he was reading the section about the issuance of greenbacks vs. the eradication of habeus corpus.
The US taxpaper should have offered to house this alphabet soup of crap but not pay for it. Those banks that have loads of it automatically are hosed and closed unless they have balance sheets that are strong enough without it.
Some could be re-capitalised post cleansing.
More on Sunshine Law and Freedom of Speech
See: http://en.wikipedia.org/wiki/Freedom_of_Information_Act_(United_States)
The 1976 Government in the Sunshine Act amendments to the FOIA
In 1976, as part of the Government in the Sunshine Act, Exemption 3 of the FOIA was amended so that several exemptions were specified:
6) related to information which would lead to financial speculation or endanger the stability of any financial institution…
However: Bush signs "OPEN Government Act of 2007" – December 31, 2007
The law recognizes electronic media specifically and defines "News Media" as "any person or entity that gathers information of potential interest to a segment of the public, uses its editorial skills to turn the raw materials into a distinct work, and distributes that work to an audience."
Redefines the definition of an agency "record" to include information held for an agency by a government contractor.
>> This gets back to basics with Freedom of Speech rights and the essential fact that taxpayer revenue is being used by Treasury to loan cash to private entities, like Chrysler, which is a key test for this pea and shell game. Tax payers have a right to know how Treasury is managing the money of the people and thus if they suppress that public information, then they are suppressing Free Speech!
Another key issue: This act allows for the full or partial disclosure of previously unreleased information and documents controlled by the United States Government.
TARP, from my understanding, is controlled by taxpayers, hence providing citizens with accounting for our cash is a no brainer — unless we have corruption and a coup in place to subvert the will of the people and to suppress Constitutional stuff like Freedom of Speech.
"With the ongoing stress on both constitutional and inherent rights of American citizens and the added assertion of government subservience to the individual, some thought it was necessary for government information to be available to the public."
"The nine exemptions to the FOIA address issues of sensitivity and personal rights."
> I think, it is obvious that this is not a matter of personal rights, but perhaps a matter of sensitivity.
A more recent and familiar situation comes to mind with Lehman, Florida and the mess there with credit and debt obligations last year, and the more recent Bear Stearns structure.
As you will recall: "Waxman says he wants to know more about BlackRock's role in managing the money, why it received a no-bid contract and whether the company's portfolio has investments in distressed mortgages or anything that may be in conflict with its new role in managing the Fed's money during the housing meltdown."
This effort by Waxman is directly linked and related to Bloombergs FOIA request, yet Waxman seems to suddenly be out of the loop and not looking for the accountability he sought earlier. The matter of collusion and corruption within government and by fraudulent wall street accounting goes back to the earlier premise that lack of knowledge is no defense and thus freedom of speech remains in the balance and the right for Americans to know what is going on with our government.
A related topic is this: At Long Last, Congress Passes IG Reform Act
http://pogoblog.typepad.com/pogo/2008/09/at-long-last-co.html
After more than a year of wishin' and hopin' and plannin' and dreamin'…at long last both houses of Congress have passed the same version of H.R. 928, the Inspector General Reform Act of 2008. Final passage came per unanimous votes in the Senate on Wednesday the 23rd, and in the House on Saturday the 27th.
> Now, back to Florida and Blackrock as an example of public information:
Florida Is Advised on Saving a State Fund
http://www.nytimes.com/2007/12/04/business/04fund.html?_r=1&adxnnl=1&oref=slogin&adxnnlx=1226163873-yztEnyR1ufjyO5nI3y5sXw
BlackRock, the asset management firm hired to advise Florida on a state pool whose subprime-tainted holdings led to withdrawal of almost half its $27 billion assets, recommended yesterday that the remaining holdings be split into two entities to ensure the fund’s survival.
BlackRock, at a meeting in Tallahassee, Fla., with officials from schools and cities participating in the Local Government Investment Pool, recommended putting about 86 percent of the $14 billion of assets that have no risk of loss or default into a “fund A.” The remaining 14 percent would go into a “fund B,” said Simon Mendelson, chief operating officer of BlackRock’s cash-management business….
> Also: Due Diligence Review Local Government Investment PoolLocal Government Investment Pool
http://www.myfloridahouse.gov/Sections/Documents/loaddoc.aspx?DocumentType=Press%20Release&FileName=100
As a result of this Run, on November 29, 2007, the SBA Trustees suspended withdrawalsfrom the Pool and on December 4, 2007, split the Pool into two funds, Fund A and Fund B. The four downgraded Securities with a then-par value of approximately $867 million together with additional securities with a par value of approximately $1.2 billion deemed by an investment manager, BlackRock, hired by the SBA, to have an unacceptable level of risk, were placed in Fund B and frozen. Additionally, the Trustees transferred to Fund B the Pool’s entire $22 million in accumulated, unspecified reserves and $96 million representing the Pool’s interest earned in November 2007 by all Participants in the Pool. The $96 millionwas transferred to Fund B in the form of $82 million in cash and $14 million in securities.
We strongly feel the business, legal and accounting basis for splitting the Pool into Funds A and B, the two “reserve” transfers and the suspension of redemptions is very problematic and will hamper the ability to attract new funds to the Pool. We have referred these items to the SBA’s forensic accountants for further examination and to address their impact on the Pool’s June 30, 2008 independent audit. Accordingly, we recommend that a new pool in the form of a new trust be created by the Legislature and the current Pool, both Funds A and B, be allowed to self-liquidate. This recommendation is explicitly conditioned upon the implementation of the risk and control safeguard we find missing in the Pool’s current operation.
Many of the Pool’s documents use the term “maturity” without explaining that maturity does not equal payment. Currently the website reports that 53.9% of Pool A assetshave a maturity beyond August 2008 and 53.2% of the Pool B assets have a maturity of “Under negotiation/Other” beyond June 2008
>>> Does anyone really care about this shit??? I'm burned out for now, but … I'd like to go and see how the folks in Florida felt about FOIA-like disclosure, because the liquidity freeze there and the mix of public funds with private investments does not seem to indicate that Blackrock can hide information from the public ….. but, that would require more work and @ $5000.00 and hour, Yves is kinda burning up my time….
Alright, I had a cookie and I have just a little more time…
November 29: Florida’s State Board of Investments freezes outflows from a state money market fund after over $16 billion is withdrawn by local schools and municipalities. A lawsuit is filed against Washington Mutual for alleged violations of the US Employee Retirement Income Security Act of 1974 (ERISA).
.. Just look what a cookie and extra sip of mocha can do…
> UNF had invested with the Local Government Investment Pool, $50.7 million of
University funds and $66.0 million of construction bond funds for the Financing
Corporation. The remaining monies for the University were invested within SPIA,
another State operated fund (approximately $30 million) and Sawgrass
Management Company ($25 million). The Financing Corporation also has funds
invested within a Goldman Sacs AAA Rated fund.
The University has taken the following actions:
Requested our independent money manager to review the Fund B portfolio. So far, he has not been able to access the portfolio in detail.
Huh … huh, that was nice, but that nice doc has no date, but looks to be from late 2007
STATE BOARD OF ADMINISTRATION
LOCAL GOVERNMENT INVESTMENT POOL
http://www.unf.edu/trustees/facmaterials/fac121307/11b_item_12_2of2.pdf
Also see: University of North Florida Finance and Audit Committee December 13, 2007 Minutes
http://www.unf.edu/trustees/facminutes/facminutespdf/fac121307.pdf
Vice President Shuman’s report also recapped the current state of the LGIP: (a) the LGIP was divided into two funds – Fund A containing 86% of the assets all of which were triple money-market appropriate assests and Fund B containing the 14% of assets that had lower ratings, (b) as of December 6, investors were able to withdraw $2 million or 15% of their share of Fund A, with a 2% penalty ifan investor exceeded the higher of these two amounts, and (c) investors were unable to withdrawfrom Fund B. Finally, Vice President Shuman talked about the actions the University had taken to date, including withdrawing 15% of its assets from Fund A and withdrawing a total of approximately $29 million from SPIA. After a full discussion, the Committee determined not to withdraw additional monies from Fund A at this time, which would necessitate the paying of a 2% penalty. Instead, members of the Committee asked that the administration monitor the activity in Fund A daily. If activity suggested some change in the asset ratings or the possibility of further large withdrawals, the administration, in consultation with the Finance and Audit Committee or Board chair, could immediately withdraw additional funds (up to the full remaining balance), paying the 2% penalty. The Committee also asked that the University stay in contact with other members of the SBA to express the University’s distress over the fact that the State was not backing the fund and that those governmental investors who withdrew their dollars from the LGIP before it was frozen were not being asked to shoulder an equitable share of the losses. Finally, the members of the Committee asked that the University schedule a follow up meeting on this topic in early January.
For kicks see: University of North Florida Finance & Audit Committee – Audit Charter
MEETINGS & COMMUNICATION The Committee shall meet at least three times annually, or more frequently as deemed necessary by any Committee member. The Committee may not conduct any meeting with fewer than three members present.
>> The Committee is subject to Florida's Government in the Sunshine Law (Sunshine Law) as set forth inChapter 286, Florida Statutes. The Sunshine Law extends to all discussions and deliberations as well as any formal action taken by the Committee. The law is applicable to any gathering, whether formal or casual, of two or more members of the Committee to discuss some matter on which foreseeable action will be taken.
> There is no public update as to what Blackrock is doing, I guess people don't give a shit, but maybe during a recession, someone may want to follow the money and look for accountability!
Related DD:
University of North Florida
Board of Trustees
October 2, 2008, 2:30 p.m.
University Center, Room 1058
Agenda
http://www.unf.edu/trustees/botagenda/agenda100208.html
Item 6 Memorandum of Understanding (MOU) between the UNF Board of
Trustees and the UNF Financing Corporation (UNFFC)
(Attachment 1, 2)
The MOU between the UNF Board of Trustees and the UNFFC is being presented for ratification by the Board of Trustees. This MOU further clarifies fund management between the University and the UNFFC. It has been reviewed by the UNFFC board of directors and the Finance and Audit Committee.
Vice President Shuman will address the Board and present this item.
hmmmm, very nice, a little innovation:
Memorandum of Understanding (MOU)
between
The University of North Florida Board of Trustees
and The University of North Florida Financing Corporation
http://www.unf.edu/trustees/botmaterials/bot100208/08a_item_6_1of1.pdf
UNFFC is the primary custodian of funds earned and/or proceeds from revenue bond financing or
other investments and, as such, will transfer funds to the designated entity within the University in
compliance with applicable laws, University policies and agreements.
Consistent with provisions of UNFFC’s bylaws and its articles of incorporation, in the event UNFFC
ceases to exist or ceases to be an Internal Revenue Code §501 (c) (3) organization, UNFFC will transfer
its assets and property to the Board of Trustees or its successor, to a reincorporated successor direct
support organization, or to another direct support organization with a similar purpose, or to the state or
federal government for public purposes, in accordance with applicable law.
>> Item 9B Accounts Receivable Write-offs (Attachment 1, 2)
Florida Statutes authorize the University’s Board of Trustees to charge off or settle uncollectible accounts. The Board delegated the authority for accounts receivable write-offs under $10,000 to the President of the University. As part of this delegation, the President will annually report the status of accounts receivable charge-offs to the Board.
As the President’s representative on this issue, Vice President Shuman will address the Committee and present an update on the University’s accounts receivable write-offs for June 30, 2008.
>>**>>** I highly recommend glossing over this part of the audit report: <<<<
http://www.unf.edu/trustees/botmaterials/bot100208/11a_item_9A_1of3.pdf
The re-structure of failed investments is apparently related to IRS not for profit re-organization (501 (c) (3), which is apparently being set to transfer funds out of the original structure connected to the LGIPs which is now being run by Blackrock. Apparently, NFU is going to spin off its own revenue bonds and break away from Blackrock ASAP, which is a matter related to current market confidence and the lack of disclosure related to this mess.
Nonetheless, since I'm new to this shit, WTF is a Special Purpose Financial Statement (SPFS) and why are they calling to attention the possibility of misstatements and control deficiencies?
In closing, this innovation with something like a SPFS and a MOU is a matter of adding layers of confusion on top of chaos, but perhaps this is how people and corporations will try to dig out of this mess. Unfortunately, this is a matter of time and transferring peas under different shells and although there may not be criminal intent, the act of transfer and shifting and re-shaping will add to a lack of confidence for investors, so I would suggest that people do serious DD and ask lots of questions and get lots of details in regard to answers. This all goes fill circle to Bloomberg's FOIA request for TARP, i.e, where the fu-k is the tax payer money going — other than CEO bonuses and vacations and facials and golf games and jets, food and all the fun that is un-accounted for.
I leave you now on peace….
UB, if you ever do get to this point (post number 41), you’ll probably go back to the squirrels @ CR and re-think dinner.
I must now face the wind and rain, so until later, when I’ll probably be either banned from future postings or sitting in a confessional…
adieu
I couldn’t let this go..
http://www.ed.gov/about/offices/list/oig/auditreports/fy2008/a17h0005.pdf
To the Inspector General U.S. Department of Education We have audited the accompanying reclassified balance sheets as of September 30, 2007 and 2006, and the related reclassified statements of net cost and changes in net position for the years then ended (hereinafter referred to as the special-purpose financial statements) contained in the special-purpose closing package of the U.S. Department of Education (the Department). Thesespecial-purpose financial statements are the responsibility of the Department’s management.
Material weaknesses are significant
deficiencies, or a combination of significant deficiencies, that result in more than a remote
likelihood that a material misstatement in relation to the special-purpose financial statements
being audited will not be prevented or detected by the Department’s internal control.
IMHO, they are trying to plan ahead, to cover up mis-information for future accounting.
This is stunning IMHO:
EXECUTIVE OFFICE OF THE PRESIDENT OFFICE OF MANAGEMENT AND BUDGETOFFICE OF MANAGEMENT AND BUDGET WASHINGTON, D.C. 20503 WASHINGTON, D.C. 20503
July 27, 2004 MEMORANDUM FOR THE HEADS OF EXECUTIVE DEPARTMENTS AND AGENCIES, CHIEF FINANCIAL OFFICERS AND INSPECTORS GENERAL
Beginning with FY 2004, the significant entities to the FR will be required to submit special-purpose financial statements to the Financial Management Service (FMS) for the compilation of the FR 1 . The special-purpose financial statements must be submitted no later than November 18 following the end of the fiscal year for which the financial statements were prepared. The special-purpose financial statements are the result of a new compilation process designed to provide a direct linkage between the agencies’ audited, consolidated department-level financial statements and the FR. This new process will aid in resolving material deficiencies of the FR cited by the U.S. Government Accountability Office (GAO, formerly the U.S. General Accounting Office). The significant entities’ auditors will opine on the special-purpose financial statements, including the reclassified balance sheet, statement of net cost, statement of changes in net position, and the accompanying notes.
1 The significant entities to the Financial Report of the U.S. Government (FR) are identified in the Department of the Treasury’s Financial Manual (TFM) Volume I, Part 2, Chapter 4700, http://www.fms.treas.gov/factsi/v1p2c470.pdf. The significant entities to the FR are referenced in the TFM as the “verifying agencies,” in relation to their responsibilities within the Governmentwide Financial Report System (GFRS)
>> this is related IMHO to over-stating GDP and distorting The federal budget!!
Link for the above:
http://www.whitehouse.gov/omb/memoranda/fy04/m04-22.pdf
Dahhh, how did I get into this watergate Hotel??
Financial Reports Division
Financial and Budget Reports Directorate
Governmentwide Accounting
Financial Management Service
Department of the Treasury
http://www.fms.treas.gov/tfm/vol1/v1p2c470.pdf
• Amounts of items based on
The intragovernmental activity and
balances contained in the Closing Package
in GFRS Module GF004, Federal Trading
Partner Note, are included within the
scope of the opinion on the special-
purpose financial statements (Closing
Package).
Verifying and nonverifying
agencies should review thoroughly
information provided as Other FR Data
(subsection 4705.45) in the Closing
Package, which is not subject to audit
coverage, to assure consistency with the
applicable data.
For additional guidance, see OMB
Bulletin No. 07-04, as amended, and
OMB Circular No. A-136, revised, on
the OMB Web site at
http://www.whitehouse.gov/omb and
GAO/President’s Council on Integrity and
Efficiency FAM, Section 595C, on the
GAO Web site at http://www.gao.gov.
Figure 1: Agencies Required To Verify and Submit a Closing Package and To Provide CFO Representations for Federal Intragovernmental Activity and Balances
Department of Agriculture
Department of Commerce
Department of Defense
Department of Education
Department of Energy
Department of Health and Human
Services
Department of Homeland Security
Department of Housing and Urban
Development
Department of the Interior
Department of Justice
Department of Labor
Department of State
Department of Transportation
Department of the Treasury
Department of Veterans Affairs
Agency for International
Development
Environmental Protection Agency
Export-Import Bank of the United
States
Farm Credit System Insurance
Corporation
Federal Communications
Commission
Federal Deposit Insurance
Corporation
General Services Administration
National Aeronautics and Space
Administration
National Credit Union Administration
National Science Foundation
U.S. Postal Service
Office of Personnel Management
Pension Benefit Guaranty
Corporation
Railroad Retirement Board
Securities and Exchange
Commission
Small Business Administration
Smithsonian Institution
Social Security Administration
Tennessee Valley Authority
U.S. Nuclear Regulatory
Commission
Consider what Ferdinand Pecora said in his memoirs from the Pecora Hearings:
“Bitterly hostile was Wall Street to the enactment of the regulatory legislation…Had there been full disclosure of what was being done in furtherance of these schemes, they could not long have survived the fierce light of publicity and criticism. Legal chicanery and pitch darkness were the banker’s stoutest allies.”
75 yrs later, not much has changed. Only that we can now add the treasury and the Fed to the list of bansksters who prefer to run their day to day ops under the cloak of pitch darkness.
To paraphrase FDR: If a taxpayer or investor wants a friend, get a dog!
I emailed the below to Sens. Dodd, Shelby, Boxer, Feinstein, Obama & the Senate Banking committee and included the link to this article. A month ago I asked my senators Boxer and Feinstein to tell me how much in contributions they received from FNM/FRE and they have refused to respond.
…………………….
“why is the Fed stonewalling on use of MY MONEY????”
to doc.
we’re listening.
to luther,
you said it exactly well.
Let’s hope he’s reading THAT Lincoln.
to yves –
hey when the sh-t is hitting the fan, and nobody can agree which way is up, well, hell, typos accepted.
If not expected.
There’s no way that knowing what the Fed Res accepts as collateral would enable arbitrage? I really don’t know, I just know that if there’s a public signal and there are people with private information, some money might be made ….
The Zog stuff was just weird. Did anybody sign their real name to that crap, and did I miss it?
Re: .. to doc. we’re listening.
Hey Joe (et al), Thanks, I thought that this was a dead link, which ended up getting too surreal, so I came back to see if drilling matters to anyone. I do wonder why no one is following up on Florida and all these little derivative problems that are under the rug — not to mention the re-invention of non-GAAP accounting within our government, the corruption at Bear, in TARP and everywhere. What an impossible mess to fix — it really is beyond fixing. The system needs to be burned down and re-built by new people — and what a revolutionary idea that would be, to dis-connect from a corrupt and oppressive government!
FYI, from James Madison, The Constitutional Convention Debates: … people deliberating in a temperate moment, and with the experience of other nations before them, on the plan of Government most likely to secure their happiness, would first be aware that those charged with the public happiness, might betray their trust. An obvious precaution against this danger would be to divide the trust between different bodies of men, who might watch and check each other.