Fed Refuses to Identify Recipients of Nearly $2 Trillionby Tim Manni
The Federal Reserve has refused to identify the recipients of nearly $2 trillion of taxpayer-supported loans, or the value of the troubled assets the central bank has accepted as collateral for their lending. The Fed’s refusal has led to taxpayer outrage, as well as a lawsuit from Bloomberg News, who claims that the Fed has violated the Freedom of Information Act.
Congress had required “transparency” as a stipulation of the $700 billion rescue plan, and both Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson agreed to the necessity of the requirement back in September. Two months later, the scope of federal lending has far exceeded the $700 billion TARP program, into various other initiatives not under the watchful eye of Congress:
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.
Banks have also refused to release coinciding information for fear of looking weak in the eyes of their customers and business partners, which history has proven to be a fatal flaw of financial institutions:
“You have to balance the need for transparency with protecting the public interest,” Talbott said. “Taxpayers have a right to know where their tax dollars are going, but one piece of information standing alone could undermine public confidence in the system.”
Despite its host of critics, the Fed’s refusal hasn’t been considered faulty in the eyes of all:
[Barney] Frank [House Financial Services Committee Chairman] said the Fed shouldn’t reveal the assets it holds or how it values them because of “delicacy with respect to pricing.” He said such disclosure would “give people clues to what your pricing is and what they might be able to sell us and what your estimates are.”
The refusal comes among news that the federal loan for insurer AIG will be restructured to reach nearly $150 billion. Taxpayers are feeling helpless and want some answers as the government spends more and more of their hard-earned money every day — we deserve it.