Fed Defies Transparency Aim in Refusal to DiscloseAnd that's just the money Congress voted for.
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.
``We need oversight,'' Paulson told lawmakers. ``We need protection. We need transparency. I want it. We all want it.''
But wait, there's more!
Fed's Role in Crisis Is Giant, if OpaqueAnd if you act now you'll receive:
Largely outside public view, however, the Federal Reserve is lending far more than that amount -- $893 billion, roughly the equivalent of the annual economic output of Mexico -- to help a wide range of institutions weather the economic storm.
As of last week, the Fed's loans included $507 billion to banks, $50 billion to investment firms, $70 billion for money market mutual funds, and $266 billion to companies that use a form of short-term debt called commercial paper. It is considering a new program that would make billions more available to prop up consumer lending: auto loans, credit cards and the like.
U.S. Pledges Top $7.7 Trillion to Ease Frozen CreditAnd then there's this:
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.
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.”
Banking Regulator Played Advocate Over EnforcerBut of course no one could have; predicted/foreseen/anticipated 9/11, New Orleans' levys, Iraq quagmire, financial disaster ... except all the experts in those areas that weren't drinking the Bush koolaid (and us DFHs.)
Agency Let Lenders Grow Out of Control, Then Fail
When Countrywide Financial felt pressured by federal agencies charged with overseeing it, executives at the giant mortgage lender simply switched regulators in the spring of 2007.
The benefits were clear: Countrywide's new regulator, the Office of Thrift Supervision, promised more flexible oversight of issues related to the bank's mortgage lending. For OTS, which depends on fees paid by banks it regulates and competes with other regulators to land the largest financial firms, Countrywide was a lucrative catch.
But OTS was not an effective regulator. This year, the government has seized three of the largest institutions regulated by OTS, including IndyMac Bancorp, Washington Mutual -- the largest bank in U.S. history to go bust -- and on Friday evening, Downey Savings and Loan Association. The total assets of the OTS thrifts to fail this year: $355.7 billion. Three others were forced to sell to avoid failure, including Countrywide.
Senior executives at Countrywide who participated in the meetings said OTS pitched itself as a more natural, less antagonistic regulator than OCC and that Mozilo preferred that. Government officials outside OTS who were familiar with the negotiations provided a similar description.
"The general attitude was they were going to be more lenient," one Countrywide executive said. For example, he said other regulators, specifically OCC and the Federal Reserve, were very demanding that large banks not allow loan officers to participate in the selection of property appraisers. "But the OTS sold themselves on having a more liberal interpretation of it," the executive said.
Winning Countrywide was important for OTS, which is funded by assessments on the roughly 750 banks it regulates, with the largest firms paying much of the freight.
I know this post has been long, especially if you followed and read the links, so I'll leave you with a joke I saw in comments here:
"A parody on how the bailout works: A man wanted to buy a donkey, so he went to a farmer and asked him to sell him one. The farmer agreed to sell the man a donkey for $100 but told the man he would have to come back tomorrow to pick it up.
The man returned the next day to retrieve his donkey only to be told by the farmer that the donkey had died overnight. OK, said the man, just give me back my $100 and we're good. I can't do that, said the farmer, I spent the money last night.
No problem, said the man, I know how to fix this situation. So the man started a raffle for the donkey, not telling anyone that the donkey was already dead. He sold 500 tickets at $2 each, for a total of $1000.
Confused, the farmer asked the man, 'Didn't anyone complain about the donkey already being dead?' 'Only the guy that won the raffle and I simply gave him his $2 back and he was happy', said the man."
Cross posted at VidiotSpeak