Fed's $2trillion hidden loans

[TheIndependent]

http://www.bloomberg.com/apps/news?p...efer=worldwide

Nov. 10 (Bloomberg) -- The Federal Reserve is refusing to identify the recipients of almost $2 trillion of emergency loans from American taxpayers or the troubled assets the central bank is accepting as collateral.


Fed Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson said in September they would comply with congressional demands for transparency in a $700 billion bailout of the banking system. Two months later, as the Fed lends far more than that in separate rescue programs that didn't require approval by Congress, Americans have no idea where their money is going or what securities the banks are pledging in return.


``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.''


Federal Reserve spokeswoman Michelle Smith declined to comment on the loans or the Bloomberg lawsuit. Treasury spokeswoman Michele Davis didn't respond to a phone call and an e-mail seeking comment.
President-elect Barack Obama's economic adviser, Jason Furman, also didn't respond to an e-mail and a phone call seeking comment from Obama. In a Sept. 22 campaign speech, Obama promised to ``make our government open and transparent so that anyone can ensure that our business is the people's business.''


The Fed's lending is significant because the central bank has stepped into a rescue role that was also the purpose of the $700 billion Troubled Asset Relief Program, or TARP, bailout plan -- without safeguards put into the TARP legislation by 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.

[grondramb]

The Feds makes loans to banks all the time and I'm not sure they are usually public...

[TheIndependent]

Originally Posted by grondramb

The Feds makes loans to banks all the time and I'm not sure they are usually public...

why are they not public?

[grondramb]

Originally Posted by pdjplano

why are they not public?

Interbank lending, to my knowledge, isn't generally public. For that matter most loans are not public. I have a house loan but you can find a public record of it.


Now there are statistics published for interbank lending rate like the LIBOR in London which an average of actual British interbank loans - but I think its like stock purchases - the loans and rates are public but not who is buying and selling.

I assume the origin of this is privacy.

[mbklein]

Loans between private individuals and businesses != loans granted to private businesses by a government bank.

[JP]

Originally Posted by pdjplano

why are they not public?

maybe to avoid panicking the bank's investors?

[grondramb]

Originally Posted by mbklein

Loans between private individuals and businesses != loans granted to private businesses by a government bank.

There are ways in which the Fed is not a government bank - for example when you look at who owns 100% of the stock.