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bacasper
Joined: 26 Mar 2007
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 Posted: Tue Nov 25, 2008 7:12 pm Post subject: Bloomberg files FOIA against Fed re: $7.7 Trillion |
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U.S. Pledges Top $7.7 Trillion to Ease Frozen Credit
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By Mark Pittman and Bob Ivry
Nov. 24 (Bloomberg) -- The U.S. government is prepared to provide more than $7.76 trillion on behalf of American taxpayers after guaranteeing $306 billion of Citigroup Inc. debt yesterday. The pledges, amounting to half the value of everything produced in the nation last year, are intended to rescue the financial system after the credit markets seized up 15 months ago.
The unprecedented pledge of funds includes $3.18 trillion already tapped by financial institutions in the biggest response to an economic emergency since the New Deal of the 1930s, according to data compiled by Bloomberg. The commitment dwarfs the plan approved by lawmakers, the Treasury Department�s $700 billion Troubled Asset Relief Program. Federal Reserve lending last week was 1,900 times the weekly average for the three years before the crisis.
When Congress approved the TARP on Oct. 3, Fed Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson acknowledged the need for transparency and oversight. Now, as regulators commit far more money while refusing to disclose loan recipients or reveal the collateral they are taking in return, some Congress members are calling for the Fed to be reined in.
�Whether it�s lending or spending, it�s tax dollars that are going out the window and we end up holding collateral we don�t know anything about,� said Congressman Scott Garrett, a New Jersey Republican who serves on the House Financial Services Committee. �The time has come that we consider what sort of limitations we should be placing on the Fed so that authority returns to elected officials as opposed to appointed ones.�
Too Big to Fail
The bailout includes a Fed program to buy as much as $2.4 trillion in short-term notes, called commercial paper, that companies use to pay bills, begun Oct. 27, and $1.4 trillion from the FDIC to guarantee bank-to-bank loans, started Oct. 14.
William Poole, former president of the Federal Reserve Bank of St. Louis, said the two programs are unlikely to lose money. The bigger risk comes from rescuing companies perceived as �too big to fail,� he said.
�Credit Risk�
The government committed $29 billion to help engineer the takeover in March of Bear Stearns Cos. by New York-based JPMorgan Chase & Co. and $122.8 billion in addition to TARP allocations to bail out New York-based American International Group Inc., once the world�s largest insurer.
Citigroup received $306 billion of government guarantees for troubled mortgages and toxic assets. The Treasury Department also will inject $20 billion into the bank after its stock fell 60 percent last week.
�No question there is some credit risk there,� Poole said.
Congressman Darrell Issa, a California Republican on the Oversight and Government Reform Committee, said risk is lurking in the programs that Poole thinks are safe.
�The thing that people don�t understand is it�s not how likely that the exposure becomes a reality, but what if it does?� Issa said. �There�s no transparency to it so who�s to say they�re right?�
The worst financial crisis in two generations has erased $23 trillion, or 38 percent, of the value of the world�s companies and brought down three of the biggest Wall Street firms.
Markets Down
Regulators hope the rescue will contain the damage and keep banks providing the credit that is the lifeblood of the U.S. economy.
Most of the spending programs are run out of the New York Fed, whose president, Timothy Geithner, is said to be President-elect Barack Obama�s choice to be Treasury Secretary.
�They Got Snookered�
The money that�s been pledged is equivalent to $24,000 for every man, woman and child in the country. It�s nine times what the U.S. has spent so far on wars in Iraq and Afghanistan, according to Congressional Budget Office figures. It could pay off more than half the country�s mortgages.
�It�s unprecedented,� said Bob Eisenbeis, chief monetary economist at Vineland, New Jersey-based Cumberland Advisors Inc. and an economist for the Atlanta Fed for 10 years until January. �The backlash has begun already. Congress is taking a lot of hits from their constituents because they got snookered on the TARP big time. There�s a lot of supposedly smart people who look to be totally incompetent and it�s all going to fall on the taxpayer.�
President Franklin D. Roosevelt�s New Deal of the 1930s, when almost 10,000 banks failed and there was no mechanism to bolster them with cash, is the only rival to the government�s current response. The savings and loan bailout of the 1990s cost $209.5 billion in inflation-adjusted numbers, of which $173 billion came from taxpayers, according to a July 1996 report by the U.S. General Accounting Office, now called the Government Accountability Office.
�Worst Crisis�
The 1979 U.S. government bailout of Chrysler consisted of bond guarantees, adjusted for inflation, of $4.2 billion, according to a Heritage Foundation report.
The commitment of public money is appropriate to the peril, said Ethan Harris, co-head of U.S. economic research at Barclays Capital Inc. and a former economist at the New York Fed. U.S. financial firms have taken writedowns and losses of $666.1 billion since the beginning of 2007, according to Bloomberg data.
�This is the worst capital markets crisis in modern history,� Harris said. �So you have the biggest intervention in modern history.�
Bloomberg has requested details of Fed lending under the U.S. Freedom of Information Act and filed a federal lawsuit against the central bank Nov. 7 seeking to force disclosure of borrower banks and their collateral. |
more at link
Bloomberg certainly is no bunch of socialist cheerleaders. So when they are crying "Foul!" and must sue the fed for the information to which taxpayers are or should be entitled, you can be sure there are major shenanigans going on.
Just think: They refuse to disclose who are the recipients of these trillions, what collateral is being received in exchange, what will be done with the money!
Last edited by bacasper on Tue Dec 02, 2008 6:20 am; edited 1 time in total |
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bacasper
Joined: 26 Mar 2007
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| Posted: Thu Nov 27, 2008 9:54 pm Post subject: |
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Howl
By Nicholas von Hoffman
November 14, 2008
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Sums of incalculable size are being spent or pledged by Paulson and his playmate, Ben Bernanke, chairman of the Federal Reserve Board, and nobody outside their organizations, or maybe inside them either, knows who got what, how much they got and under what conditions they got it.
In the past couple of months Bernanke has loaned out $2 trillion to unnamed companies under eleven different programs, all but three of which have been slapped together in the past fifteen months of financial crisis. To repeat, we do not know who got this money or what collateral was put up in return for the loans or what conditions were attached to them.
The sums involved are almost three times as large as Paulson's $700 billion muddled bailout efforts that Congress voted for last month. Bernanke does have the legal authority to pass out these trillions without Congressional authorization and without explanation, but secrecy breeds suspicion and loss of confidence.
These officials preface every speech by talking about "transparency," their favorite word, at the same time they are handing off $2 trillion and they won't say to whom, leading Bloomberg News to file suit under the Freedom of Information Act.
Paulson has made off with $50 billion to give to AIG for the purpose of setting up a special entity where the company's lousiest loans are to be kept off the books and the unknown debtors protected. When asked about this by the New York Times, Lynn E. Turner, who sits on the Treasury Department's Advisory Committee on the Auditing Profession, complained that "We've had way too many things here that nobody knows anything about.... That's why no one has faith in the capital markets."
Paulson appears to have given away, invested, loaned or lost about $300 billion of the first $700 billion Congress gave him, but he has lost more than money: nobody believes him or Bernanke anymore. |
Does nobody care about where all this money is going, who is getting it, and what collateral, if any, is being received in exchange? Maybe not too many around here do, but Bloomberg certainly does. After all they are in the financial services industry. How can they advise about investment decisions without basic financial data?
Is telling us where all these trilions of tax dollars are going counterproductive?
�That�s Counterproductive�
�Some have asked us to reveal the names of the banks that are borrowing, how much they are borrowing, what collateral they are posting,� Bernanke said Nov. 18 to the House Financial Services Committee. �We think that�s counterproductive.� |
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Tater
Joined: 13 Oct 2008
Location: Korea
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| Posted: Thu Nov 27, 2008 11:24 pm Post subject: |
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| Why do you change he font size and boldness so randomly? I might read what you post, but never when it's like taking an eye test. |
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bacasper
Joined: 26 Mar 2007
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| Posted: Fri Nov 28, 2008 7:30 am Post subject: |
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If people just want to skim, just read the bold and large stuff for the main gist. It's not random. I highlight the more important stuff.
I always appreciate it when others point out the highlights of an article.
But OK, I'll translate for you:
The Fed has given out more than ten times what was voted on in the bailout, or $7.76 trillion dollars. This represents half of the entire output of the United States in one year.
No one knows who has received these funds, how much they got, and what taxpayers are getting in collateral for their money, i.e. taxpayers are not likely to ever see this money repaid. It is enough to pay off half of all the home mortgages in the country.
In the meanwhile, people are losing their homes, jobs, while prices for food, transportation, and just about everything else is rising. Even Bloomberg, a mainstream capitalist news outfit, sees something so wrong that they are suing the federal government for information which taxpayers should normallly be entitled to. Bernanke was asked in Congress where was the money going to, and instead of answering he said, "That would be counterproductive."
Is something not wrong with this picture?
In the meanwhile Pres-elect BO is appointing to key positions to "fix" this problem the very same people who got us into it.
Where's the outrage? Must people actually be living on the street before they will wake up? |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Fri Nov 28, 2008 9:53 am Post subject: |
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| Yes. The secrecy of the Fed is outrageous. They are (Bernake et al) arrogant beyond words. |
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Kuros
Joined: 27 Apr 2004
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| Posted: Fri Nov 28, 2008 10:07 am Post subject: |
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Since you sniped at me in another post for a simple grammatical omission . . .
Bacasper,
Bloomberg isn't suing the Fed for $7.6 trillion in damages. That's not even possible. Sovereign immunity.
No, what's happening here is Bloomberg is enjoining the government to release information under a specific exception to sovereign immunity known as the Freedom of Information Act. The FoIA should be quite well known, even to conspiracy theorists. The FoIA does not allow damages.
How the hell do you expect credibility around here when you can't get the basic cause of action under the law straight? |
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bacasper
Joined: 26 Mar 2007
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| Posted: Sat Nov 29, 2008 8:21 am Post subject: |
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Kuros, I seriously could not make head nor tail of that sentence in the other thread and wanted to understand it.
Anyway, let me requote, since it seems you missed it:
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| Bloomberg has requested details of Fed lending under the U.S. Freedom of Information Act and filed a federal lawsuit against the central bank Nov. 7 seeking to force disclosure of borrower banks and their collateral. |
| Quote: |
| ...leading Bloomberg News to file suit under the Freedom of Information Act. |
Nowhere did I say they were suing for damages.
How the hell can you expect credibility when you misquote people? |
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Kuros
Joined: 27 Apr 2004
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| Posted: Sat Nov 29, 2008 8:34 am Post subject: |
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| bacasper wrote: |
Kuros, I seriously could not make head nor tail of that sentence in the other thread and wanted to understand it.
Anyway, let me requote, since it seems you missed it:
| Quote: |
| Bloomberg has requested details of Fed lending under the U.S. Freedom of Information Act and filed a federal lawsuit against the central bank Nov. 7 seeking to force disclosure of borrower banks and their collateral. |
| Quote: |
| ...leading Bloomberg News to file suit under the Freedom of Information Act. |
Nowhere did I say they were suing for damages.
How the hell can you expect credibility when you misquote people? |
You are truly confused.
Look at the title of this thread.
| Quote: |
| Bloomberg sues Fed for $7.7trillion |
[/quote] |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Sat Nov 29, 2008 8:52 am Post subject: |
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| No, Kuros is right. It is a suit about transparency/disclosure about 7 trillion+. |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Sat Nov 29, 2008 5:24 pm Post subject: |
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This is quite long, but excellent and related to the OP:
http://blogs.ft.com/maverecon/2008/11/even-central-bankers-should-be-held-accountable-they-play-with-public-money-after-all/
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Even central bankers should be held accountable: they play with public money after all
November 29, 2008
Bloomberg News filed a federal lawsuit on November 7, 2008, to force disclosure by the Federal Reserve, under the US Freedom of Information Act, about the lending by the Federal Reserve system to private banks. Bloomberg wants to know the identities of the borrowing banks, how much each one borrowed, and the assets the Fed has accepted as collateral for these loans by the Fed.
The request is not prima facie unreasonable. Under the 11 facilities cited in the lawsuit (which don�t include the $700 bn of the TARP, which is a Treasury programme), the Fed has extended well over $2 trillion worth of credit. Initially, most of this was secured. With the growing volume of Fed purchases of commercial paper, and given the range of options for outright purchases of private securities provided by the $800 facility announced on November 26 ($200 bn for consumer credit and $600 bn for purchases by the Fed of mortgage-backed securities and of debt issued by mortgage lenders), the Fed is now also a major unsecured creditor.
The Fed�s exposure to credit risk is likely to escalate rapidly as the Fed engages in large-scale quantitative easing, taking onto its balance sheet, either as collateral or through outright purchases, ever larger amounts of every poorer quality private securities. A trillion here, a trillion there - even in Washington DC, you are talking real money for which accountability to the Congress, the US tax payer and the wider public is essential.
Our financial leaders certainly talk the accountability and transparency talk.
Consider Treasury Secretary Paulson�s words at the September 23, 2008 hearing of the Senate Banking Committee about the need for transparency in the purchase of distressed assets (the original intent of the TARP as a fund for price discovery for toxic assets was still alive then): �We need oversight,� We need protection. We need transparency. I want it. We all want it.�� On September 24, 20098, Bernanke also sang the Transparency Hymn in relation to the TARP: �Transparency is a big issue,�.
Transparency is such a big issue, apparently, that it cannot be squeezed into the Fed�s procedures for managing its lending facilities. Following an initial request for this information by Bloomberg in May 2008, the Fed stonewalled, never gave a formal answer, but hinted that it could not provide the information because of a commercial confidentiality exemption clause in the Freedom of Information Act.
At a hearing of the House Financial Services Committee on November 18, 2008, Chairman Ben Bernanke was asked about this request for information. The hearing can be seen in its entirety here. The transcript will be available at the same URL in due course.
Chairman Bernanke�s aswer consisted of variations on �nyet�.
�Some have asked us to reveal the names of the banks that are borrowing, how much they are borrowing, what collateral they are posting,� � We think that�s counterproductive.�
The arguments for �nyet�
Stigmata
Chairman Bernanke, in the House Financial Services Committee hearing, played the familiar �air on a stigma string� as one argument for not releasing the information.
�First, the success of this depends on banks being willing to come and borrow when they need short-term cash,� and �There is a concern that if the name is put in the newspaper that such-and-such bank came to the Fed to borrow overnight for a perfectly good reason, that others might begin to worry is this bank creditworthy and that might create a stigma, a problem, and might cause banks to be unwilling to borrow, and that would be counterproductive.�
Trust us, we know what we are doing; your money is safe
Chairman Bernanke also said that �We take collateral, we haircut it, it is a short-term loan, it is very safe, we have never lost a penny in these various lending programs,�.
An evaluation of the merits of Chairman Bernanke�s �nyet�
Chairman Bernanke�s arguments for not releasing the requested information are 10 percent correct, 90 percent self-serving Fed-accountability-avoiding twaddle.
Let me start by noting that, even if it were true that revealing the requested information would violate commercial confidentiality, that such a violation would create stigma for the borrowing banks and that such stigma would result in material damage to the stability of the financial system, it would not automatically follow that the information in question should be kept secret. There are things that are even more important than commercial confidentiality, bank stigma and financial stability. Accountability for the use of public money could be one of these things. At the very least there would be a clash of competing public interests. This conflict should not be resolved through a unilateral decision by just one of the interested parties, the Fed.
Stigmata
It is correct that the immediate revelation of the identy of a borrowing bank could be so market-sensitive, because of stigmatisation effects, that confidentiality as regards the identity of the borrower makes sense for a limited period. But for a limited period only. After six months, nobody cares. After a year, nobody remembers. Once the loan has been repaid, the stigma issue is no longer relavant.
The key point is that, for democratic accountability for the use of public money to exist, there has to be certainty that at some point there will be full revelation of the identity of each borrowing institution, how much it borrowed, on what terms, and against what collateral. While there can be a finite (but short) delay in divulging the identity of the borrower, all other information - the amounts borrowed (collectively and by individual anonymous borrowers) should be in the public domain immediately. Even in the most paranoid of worlds, there is no reasonable argument, other than an unwillingness to be held accountable for possible mistakes, for not releasing, instantaneously, the terms on which the borrowing occurred and the nature and valuation of each specific item of collateral offered .
It should be obvious why it is essential that all information be in the public domain, that is required to assess the Fed�s valuation of the collateral at the time the loan was made. This is the information required to assess the magnitude of the ex-ante subsidy the Fed provided to the borrower - the quasi-fiscal subsidy, if any, provided by the Fed, based on the information available at the time the loan was made. This information consists not just of the interest rate on the loan, the fees and the haircut applied to the collateral. The haircut (discount) on the collateral, which central banks are often happy to provide, are applied to the price or valuation of the collateral, not to its notional or face value.
With illiquid collateral, there often is no market price on which to base a valuation to which the haircut can be applied. In that case, central banks are supposed to do their own pricing of the illiquid securities offered as collateral. The ECB refers to such a �model based� price as the �theoretical price�. I have repeatedly requested members of the ECB�s Governing Council to see to it that the ECB puts in the public domain (a) the models or methods used by the ECB to price the illiquid securities offered as collateral and (b) to provide the detailed, item-by-item actual valuations (prices) applied to the collateral by the ECB (to which the haircuts, which are in the public domain, then are applied). I am still waiting to see either the models or the valuations.
The Fed has an even worse track record as regards the valuation of illiquid collateral than the ECB. In the prehistoric days when there still were independent investment banks in the USA, these primary broker-dealers were allowed to borrow from the Fed (through the Primary Dealer Credit Facility and the Term Securities Lending Facility) not directly, but via their clearing bank (e.g. JP Morgan Chase acted as agent for Bear Stearns in these transactions). The Fed accepted the valuation made by the clearing bank acting as agent of the primary dealer, of the collateral offered by that same primary dealer. How could an arrangement so full of potential conflict of interest have been agreed to by the Fed? It is designed to enable to primary dealer and its clearer to collude to pass off pigs ear securities to the Fed as silk purse collateral.
I don�t know whether these kinds of insane valuation arrangements (which apparently have a long history in the Fed�s dealings with the primary dealers) have survived the demise of the stand-alone investment bank as a business model in the USA. But until we get from the Fed both the models or methods used by it to price the illiquid securities offered as collateral and the detailed, item-by-item actual valuations (prices) applied to the collateral (valuations to which the public-domain haircuts are subsequently applied), I will not accept any assurances that the collateral accepted by the Fed is valued properly, and that the tax payer is therefore protected.
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"Counterproductive". What a dick. He just doesn't want us to know how much he gave his buddies and the extent to which they pissed it away. |
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bacasper
Joined: 26 Mar 2007
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| Posted: Sat Nov 29, 2008 9:53 pm Post subject: |
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| mises wrote: |
| No, Kuros is right. |
He's right only if you read the title and not the actual articles. |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Sun Nov 30, 2008 8:44 am Post subject: |
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I think his issue was with a misleading title.
Anyways, I assume we can all agree that the Fed should disclose who is getting the cash. |
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bacasper
Joined: 26 Mar 2007
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| Posted: Tue Dec 02, 2008 6:31 am Post subject: |
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| mises wrote: |
| I think his issue was with a misleading title. |
OK, I fixed it. This is the third title this thread has had, but at least each change has not been "counterproductive."
| Quote: |
| Anyways, I assume we can all agree that the Fed should disclose who is getting the cash. |
I don't understand how this is even an issue, nor how Congress nor citizens aren't up in arms over this. The blatant disdain for people being shown here is outrageous.
Is there anything comparable in our history when what was done with public money was hidden from taxpayers? |
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bacasper
Joined: 26 Mar 2007
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| Posted: Fri Sep 11, 2009 11:22 pm Post subject: |
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Bloomberg wins this round, but the informatoin has time value. By time all the appeals go through, it may be worthless, effectively giving the victory to the Fed.
Court Orders Fed to Disclose Emergency Bank Loans
By Mark Pittman
Aug. 25 (Bloomberg) -- The Federal Reserve must for the first time identify the companies in its emergency lending programs after losing a Freedom of Information Act lawsuit.
Manhattan Chief U.S. District Judge Loretta Preska ruled against the central bank yesterday, rejecting the argument that loan records aren�t covered by the law because their disclosure would harm borrowers� competitive positions.
The Fed has refused to name the financial firms it lent to or disclose the amounts or the assets put up as collateral under 11 programs, most put in place during the deepest financial crisis since the Great Depression, saying that doing so might set off a run by depositors and unsettle shareholders. Bloomberg LP, the New York-based company majority-owned by Mayor Michael Bloomberg, sued on Nov. 7 on behalf of its Bloomberg News unit.
�The Federal Reserve has to be accountable for the decisions that it makes,� said U.S. Representative Alan Grayson, a Florida Democrat on the House Financial Services Committee, after Preska�s ruling. �It�s one thing to say that the Federal Reserve is an independent institution. It�s another thing to say that it can keep us all in the dark.�
�Inadequate Search�
The judge said the central bank �improperly withheld agency records� by �conducting an inadequate search� after Bloomberg News reporters filed a request under the information act. She gave the Fed five days to turn over documents it told the reporters it located, including 231 pages of reports, and said it must look for more at the Federal Reserve Bank of New York, which runs most of the loan programs.
The central bank �essentially speculates on how a borrower might enter a downward spiral of financial instability if its participation in the Federal Reserve lending programs were to be disclosed,� Preska wrote. �Conjecture, without evidence of imminent harm, simply fails to meet the Board�s burden� of proof.
David Skidmore, a Fed spokesman who said the board�s staff was reviewing the 47-page ruling, declined to comment on whether the central bank would appeal to the U.S. Court of Appeals in New York.
Federal Reserve Chairman Ben S. Bernanke, who led the biggest expansion of the central bank�s power in its 95-year history, was nominated to a second term today by President Barack Obama.
Banks Worried
Obama promised a new era of government openness when he took office in January, issuing a statement telling agencies �to adopt a presumption in favor of disclosure� in responding to requests under FOIA.
continued at link |
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Kuros
Joined: 27 Apr 2004
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| Posted: Sat Sep 12, 2009 12:57 am Post subject: |
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| Good title. |
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