Re: The $2 Trillion Secret

On Sep 19, 5:49�am, Riaz K Tayob <riaz.ta...@gmail.com> wrote:

Pat Choate - Author of Saving Capitalism
Posted: September 18, 2009 04:01 PM

The $2 Trillion Secret

President Barack Obama went to the center of New York's financial
district this week to describe how his Administration intended to
overhaul U.S. financial regulations. The hallmarks of these reforms, he
said, would be transparency and accountability.

Fortunately, the President need not wait on Congressional enactment of
legislation to get the transparency he seeks. He already has the
authority to release all the details of the TARP bailout and identify
the beneficiaries, how much money they got, what terms the Treasury
Department imposed, what collateral was posted and what the recipients
did with the taxpayers' funds. If the Treasury lacks that data, the
General Accountability Office has the authority and resources needed to
collect, organize, and analyze it.

A more difficult challenge will be to persuade the Federal Reserve
System to release similar information on the $2 trillion of emergency
loans it made as part of its economic recovery program.

Several news organizations, including Fox and Bloomberg, have sought
that information under the provisions of Freedom of Information laws
since 2007. Throughout the spring, summer and fall of 2008, Federal
Reserve officials stalled the requests, finally claiming that release of
the information might embarrass recipient stockholders, might trigger a
run by bank depositors and might make their economic recovery efforts
more difficult.

Bloomberg News filed a federal lawsuit in November 2008 in the U.S.
District Court, Southern District of New York (Manhattan) challenging
that stonewalling and won the case. Chief U.S. District Judge Loretta
Preska on August 24 ruled that the Fed had "improperly withheld agency
records" giving it a week to disclose daily reports on its loans to
banks and other financial institutions.

Three days later, Federal Reserve lawyers asked the courts for a delay
so that they could make an expedited appeal of her decision. Several
major banks, operating through an organization named "The Clearing
House," filed a supporting brief with the appeals court, claiming that
the Federal Reserve had provided its members emergency funds under an
agreement not to identify the recipients or the loan terms.

The Clearing House brief described its members as, "[T]he most important
participants in the international banking and payments systems and among
the world's largest intermediaries in interbank funds transfers." They
include ABN Amro Bank, N.V. (Dutch), Bank of America, The Bank of New
York Mellon, Citibank, Deutsche Bank Trust (Germany), JP Morgan Chase
Bank, UBS (Switzerland), and Wells Fargo.

As the sheer volume of the Fed financing makes clear, the bailout of the
financial sector involves more than the $700 billion approved by
Congress in late 2008. The Federal Reserve's $2 trillion of secret deals
is by far the largest portion.

Why are the Fed and the banks fighting so hard to keep the loan details
secret? Congress and taxpayers cannot know until they have the
information the Federal Reserve is keeping from them, but several
plausible explanations exist.

One is that the Fed has taken a great deal of worthless collateral and
is propping up failed companies and banks. A second is that the
information will make the issue of paying out huge Wall Street bonuses
in 2009 politically radioactive, particularly if it turns out the
payments are dependent on these federal loans.

Finally, the Federal Reserve probably does not want that information to
be part of the forthcoming Senate hearings on the re-confirmation of Ben
Bernanke, current Chairman of the Federal Reserve.

If President Obama seriously wants transparency and accountability, the
place to start is Ben Bernanke's confirmation hearing.

The President and the U.S. Senate should put Bernanke's nomination on
hold until the Federal Reserve makes public the detailed information
about these unprecedented $2 trillion of secret loans.
Pat Choate: The $2 Trillion Secret (19 September 2009)http://www.huffingtonpost.com/pat-choate/the-2-trillion-secret_b_2917...