Fed Balks at Releasing Toxic Waste Details

In a follow-up to last week's announcement that they had filed suit against the Federal Reserve after failing to obtain requested data under the Freedom of Information Act about all the toxic waste the U.S. government is buying from Wall Street firms on behalf of the American taxpayer, an update was filed at Bloomberg today.

(I don't know if you've noticed or not, but all these mortgage securities and derivatives that the Fed and Treasury are buying on our behalf are now commonly referred to as "toxic waste" in the mainstream media - not in this story, but in many others. At first it was odd, now it seems routine.)

Bloomberg's desire to have a peek at some of the details of all this waste seems to be a quite reasonable request.

That is, everything except the part about this being taxpayer money that is being spent.

When rescue money flows from government coffers as it has in recent months, debts quickly grow too large to be repaid and money printing soon becomes a justifiable means to an end.

All of this new government money being borrowed or printed will just get tacked onto the existing tab - either the national debt or future inflation - and, at some point, the U.S. government will default on a large portion of its debt and we'll have much higher prices.

If we survive, that is. That's what's important now.

Remember, you can't worry about water damage when you're putting out a fire ... and this is one very large fire.

The taxpayer shouldn't really be concerned about repayment. After all, every U.S. citizen already owes tens of thousands of dollars that they'll never have to pay back. But, it would be nice to know exactly what it is that the government is buying.

Bloomberg provides the details:

 Fed Defies Transparency Aim in Refusal to Identify Bank Loans
Nov. 10 -- 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.

...

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.

...

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.

Before Sept. 14, the Fed accepted mostly top-rated government and asset-backed securities as collateral. After that date, the central bank widened standards to accept other kinds of securities, some with lower ratings. The Fed collects interest on all its loans.

In an interview last week Representative Barney Frank (D-Mass.) said he's talked with Fed officials such as Federal Reserve Bank of New York President Timothy Geithner and deems the recent actions appropriate.

He went on to note, "I talk to Geithner and he was pretty sure that they're OK."

Wheww!!

Actually, there seems to be a perhaps legitimate concern that revealing prices paid for these assets could be disruptive to financial markets, in some cases establishing a market value for similar securities.

Maybe that would be a good thing.

That is, as long as the government overpays - and there should be no question about the fact that they are doing just that.

Comments

[SW Richmond:]

Tim,

The system is out of control, efforts to control the system are themselves out of control, and the people in control of the control efforts are out of control. We're going to crash.

Have you seen the movie "Spaceballs"? The Fed is going to "Ludicrous Speed."
www.youtube.com/watch?...

One can imagine Bernanke as "Dark Helmet":

Colonel Sanders: "Prepare ship for light speed."

Dark Helmet: "No no no, light speed is too slow!"

CS: "Light speed too slow?"

DH: "Yes, we're gonna have to go right to: Ludicrous Speed!"

CS: "Ludicrous Speed? Sir, we've never gone that fast before. I don't know if the ship can take it."

DH: "Whatsamatter Colonel Sanders, chicken?"

2008 Nov 10 01:55 PM

[MarvinMBA:]

Things are certainly getting out of control very quickly. We could be in a deep recession whe Obama takes office. Its interesting to note that the Republicans are now calling our economy a Obama Recession before he even takes office!!! Unbelievable and there are those that would believe this crap...lets call a spade a spade...this is a REPUBLICAN NIGHTMARE.

2008 Nov 10 02:36 PM

[Smarty_Pants:]

SWRichmond:

You forgot the follow on qoute:

(upon going to ludicrous speed)

DH: "My brains are going into my feet!"

2008 Nov 10 02:52 PM

[Adam O.:]

ABC News has posted the complaint:

abcnews.go.com/images/...

2008 Nov 10 03:32 PM

[prudentinve...:]

Kudos to Bloomberg for performing a valuable public service.

2008 Nov 10 04:26 PM

[Jason Rines...:]

I would agree Prudent Investor. Kleptocrocy is not a Democratic or Republican issue, it's an American issue. Like investors, the public will find those individual performers, non-performers or the corrupt to bring to or exit from office. That will take some time.

2008 Nov 10 05:23 PM

[websmith:]

The average taxpayer shouldn't worry about repayment unless they are also citizens and worried about their country. The credit cars companies have preyed on the population loaning them money and raising the interest rate until they have taken every last dime. Now that no money is going towards the purchase of goods and services, their greed has destroyed the country's economy and we are expected to bail then out.

ewebsmith.com/Finance/...

2008 Nov 10 09:31 PM

[Steven Hansen:]

everything treasury and the fed are doing, beginning at the time that the bailout was approved - must be transparent. the dark side has taken control.

if this continues, the next president will do the same thing. the more things you can hide - the more things you do not have to explain. this is the way of politicians.

where is the american civil liberties union when poor joe the plumber needs them?

2008 Nov 10 10:12 PM

[Homer II:]

On Nov 10 02:36 PM User 118015 wrote:

> are those that would believe this crap...lets call a spade a spade...this
> is a REPUBLICAN NIGHTMARE.

I don't think so... The core problem we're facing is the housing and mortgage collapse. If I'm not mistaken, the massive delinquincies in mortgages are due to the fraud in loans made to people who didn't legally qualify for loans in the first place. These loans were forced by the CRA which was a DEMOCRATIC program.

2008 Nov 11 01:41 AM

[john s. gordon:]

websmith - you have to remember that a bank is an institution that is allowed (legally) to borrow money from the u.s govt @ 2% and lend it to you @29% & pocket the difference.
> jack

2008 Nov 11 08:45 AM

[rm:]

[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.]

I'm not a lawyer, but the Fed is NOT a government agency. So, is it even subject to FOIA?

2008 Nov 11 09:41 AM

[flow5:]

The FED is following the most prudent course. There are actually very bright people working on the FED's technical staff.

There are staff studies which aren't released to the public for years. Case in point: the 1931 commisson on member bank reserve requirements which wasn't declasified until 1983. Makes you wonder what else is classified.

2008 Nov 11 07:00 PM

[john s. gordon:]

user - yes we heard r.limbaugh say that obama caused the current recession. however this recession began in june 2007. anyone who listens to anything limbaugh says is already a loony bin case.
> jack

2008 Nov 12 08:06 PM