Transparency in Government

(or: What Are They Afraid of?)

My confidence in the government to do anything right is beginning to overwhelm me. I could just scream.

From On the Money. National Public Radio, November 14, 2008. (This is an interview: please see full text at http://www.onthemedia.org/transcripts/2008/11/14/01)

Show Me the Money

After months of asking The Federal Reserve to disclose the details of two trillion dollars in government loans to troubled financial institutions, Bloomberg News is suing The Fed under the Freedom of Information Act. Bloomberg News editor in chief Matt Winkler says taxpayers should know where their money is going.

So, thanks again to Mr. Barney frank, we the people still don’t know where our money went. I feel it pales in comparison to the recent 700 billion dollar “stimulus” Why don’t they just divide the money into 300,000 and send us a check Let’s see how that divides out: hmmm. That should be a $233,000 check for every citizen. Bring it! We can fix the economy ourselves!! Who needs Congress?

And from BloggingStocks visit: http://www.bloggingstocks.com/2008/11/10/the-feds-dirty-little-2-trillion-secret/)

The Fed's dirty little $2 trillion secret

                     Posted Nov 10th 2008 12:42PM by Peter Cohan

The Federal Reserve has lent out $2 trillion worth of your money -- but it refuses to say who got it or on what terms. We already know that $29 billion worth went to JPMorgan Chase (NYSE: JPM) -- to shift the worst junk on Bear Stearns' balance sheet to the Fed's back in March. And it's safe to assume that the $2 trillion the Fed lent out is being exchanged for similarly junky assets.

Why is the Fed keeping this information secret? I can only guess at three reasons. Is such secrecy appropriate for the U.S., which is supposedly a democracy? I don't think so. My guess is that the Fed is keeping all this secret because it believes that such secrecy will keep the world from losing whatever shred of confidence it still has in the global financial system. That's because the loan recipients probably include every major financial institution.

The second reason may be that the Fed does not want us to know just how much risk it has taken on. But it should be pretty obvious that the Fed's balance sheet, which used to have $800 billion in relatively safe Treasury securities, is now weighted down with all the toxic waste that banks took on to boost executives bonuses during the last several years. And the key question is how big a loss that the Fed will end up taking on these assets.

The final reason for the secrecy may be a reluctance to give the market useful insights into what the Fed thinks these assets are really worth. Such pricing information would likely lead to far bigger asset write-downs. And the bigger write-downs would require an increase in the amount that the financial institutions would need to raise in order to comply with minimum capital requirements.

Ultimately, the truth will come out. Perhaps, the current administration wants his successor to reveal the Fed's dirty little secret.

Peter Cohan is President ofPeter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in JPMorgan securities

From AlterNet (http://www.alternet.org/blogs/peek/106443/why_won't_the_federal_reserve_say_who_they_gave_$2_trillion_to/)

Why Won't the Federal Reserve Say Who They Gave $2 Trillion To?

Posted by Ian Welsh, Firedoglake at 5:06 AM on November 11, 2008.

The Federal Reserve is refusing to identify the recipients of almost $2 trillion of emergency loans.

Apparently Bernanke, that wonderful bipartisan soul who is so competent and wonderful that everyone in the village thinks Obama should leave him in charge is refusing to identify who got almost 2 trillion dollars of Fed cash. Bloomberg News is suing to find out. Personally I really, really, really want to know. What exactly is Bernanke hiding? Who got the money he doesn't want us to know got the money?

This is money that was loaned in exchange for "collateral", by which we mean "trash no one else but the Fed would buy for anything but cents on the dollar." Barney Frank, embarrassing himself yet again, claims the Fed should keep its clap shut because if people know how bad it is, well, there might be a run. I think Barney's missing the point, as long as people don't know how bad it is, they won't trust anyone who might be borrowing large amounts of money from the Fed with crap collateral, because they don't know how bad it is and they suspect it's really really really bad. As in 10 cents on the dollar bad.

More to the point, that 2 trillion is taxpayer money, and taxpayers have a right to know what sweetheart deals Bernanke's been giving out, and who's been getting what. This whole "this information is too scary for citizens to know" schtick is so Bush regime. I thought we were moving into a new era of openness? Perhaps Barney should get with the program?

As for Bernanke, this is yet another reason why Bernanke, a central banker so incompetent he lost complete control of LIBOR, his most basic job, should lose his position. Sure, his mandate runs for another year, but if Obama asks him to step down, I can't imagine he wouldn't. The idea that a central bank that has screwed up as badly as the Fed has under both Greenspan and Bernanke is so much better off independent than with the public having some control is ridiculous and fundamentally anti-democratic. Central bank independence has just led to a huge financial bubble and economic collapse, while Bernanke and Greenspan both acted as if they were virtual dictators.

Bernanke needs to go, and either before or after he goes, the Fed needs to come clean about who it has given 2 trillion in loans to, and what the collateral is.