Feds Refuse To Disclose $2Trillion Of Emergency Loans

Remember back in September, when Paulson and Bernanke promised to comply with Congress for transparency in the $700 billion dollar bailout – I guess the honeymoon is over and we are back to the secrecy agenda.  Here we are several months later, the American citizens have no idea where any of our money is being spent.  Did I mention that the Feds also lent more than what was approved by Congress, of course, those individual programs don’t require their approval.  That news just makes my stomach knot up worse.  Bloomberg‘s, Mark Pittman, Bob Ivry and Alison Fitzgerald, have found out more information.

“The collateral is not being adequately disclosed, and that’s a big problem,” said Dan Fuss, vice chairman of Boston- based Loomis Sayles & Co., where he co-manages $17 billion in bonds. “In a liquid market, this wouldn’t matter, but we’re not. The market is very nervous and very thin.”

Bloomberg News has requested details of the Fed lending under the U.S. Freedom of Information Act and filed a federal lawsuit Nov. 7 seeking to force disclosure.

The Fed made the loans under terms of 11 programs, eight of them created in the past 15 months, in the midst of the biggest financial crisis since the Great Depression.

“It’s your money; it’s not the Fed’s money,” said billionaire Ted Forstmann, senior partner of Forstmann Little & Co. in New York. “Of course there should be transparency.”

The Federal Reserve spokeswoman declined comment about the Bloomberg lawsuit.

Total Fed lending topped $2 trillion for the first time last week and has risen by 140 percent, or $1.172 trillion, in the seven weeks since Fed governors relaxed the collateral standards on Sept. 14. The difference includes a $788 billion increase in loans to banks through the Fed and $474 billion in other lending, mostly through the central bank’s purchase of Fannie Mae and Freddie Mac bonds.

Before Sept. 14, the Fed accepted mostly top-rated government and asset-backed securities as collateral. After that date, the central bank widened standards to accept other kinds of securities, some with lower ratings. The Fed collects interest on all its loans.

Even though Bernanke and Paulson called for transparency and said we need oversight before the Senate Banking Committee hearing in Washington, this outcome was predictable, in my opinion.  When has anything in the Bush Administration over the last eight years been transparent to anyone?  Never is the answer.  To expect the status quo to change is naive.

For the whole story, here is the link.

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